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Frasers Centrepoint Trust’s Earnings: What Investors Need to Know

Last Friday, Frasers Centrepoint Trust  (SGX: J69U) released its first quarter earnings report for its fiscal year ending 30 September 2017 (FY2017). The reporting period was from 1 October 2016 to 31 December 2016.

As a quick background, the real estate investment trust has ownership stakes in six sub-urban shopping malls in Singapore. Causeway Point and Northpoint make up a significant portion of its revenue and income. The REIT also holds a 31.2% stake in the Malaysia-listed Hektar Real Estate Investment Trust.

You can read more about Frasers Centrepoint Trust in here, or catch up with the results from its previous quarter here.

Financial highlights

The following’s a rundown on some of the latest financial figures for Frasers Centrepoint Trust:

  1. Gross revenue fell to $44.1 million in the reporting quarter, down 6.4% from FY2016’s first quarter. This was largely due to the asset enhancement works going on at Northpoint.
  2. Net property income (NPI) also fell by 5.7% year-on-year to $31.6 million.
  3. The share of associate results (operations), which covers contributions from H-REIT, fell 5.5% from $0.95 million in FY2016’s first quarter to $0.90 million in the reporting quarter.
  4. All told, Frasers Centrepoint Trust’s distribution per unit (DPU) for FY2017’s first quarter was 2.89 cents, up 0.7% from FY2016’s first quarter.
  5. The REIT’s property portfolio was valued at $2.56 billion as of 31 December 2016. Frasers Centrepoint Trust ended its reporting quarter with a net asset value per unit of $1.93, some 1% higher than a year ago.

Beyond these, Foolish investors may also want to keep an eye on the REIT’s debt profile. The debt profile may provide clues on how the REIT is funded and its sensitivity to the interest rate environment. These are summarised for Frasers Centerpoint Trust below:

2017-01-21 Frasers Centrepoint Trust Debt Table
Source: Frasers Centrepoint Trust’s earnings presentation

As of 31 December 2016, Frasers Centrepoint Trust’s borrowings was $785 million, up from the $724 million recorded a year ago. There was an increase in borrowings due to the acquisition of the Yishun 10 retail podium. The REIT’s gearing ratio rose slightly as a result.

But, the REIT’s all-in financing cost was lower, which led to a higher interest cover ratio. The REIT’s weighted average debt to maturity also increased to 2.6 years, up from 1.45 years seen a year ago.

For FY2017, around 25% of the REIT’s total debt will need to be refinanced. Investors may want to watch the REIT”s progress in refinancing its borrowings.

Operational highlights

The overall portfolio occupancy for Frasers Centrepoint Trust came in at 91.3% for the reporting quarter. Bedok Point and Changi City Point recorded occupancy rates of 82.9% and 85.9%, respectively. Meanwhile, Northpoint’s occupancy fell to 81.9% due to an ongoing asset enhancement initiative (AEI). Northpoint’s occupancy is projected to decline to between 57% and 58% in the February 2017 to April 2017 period.

The REIT’s weighted average lease to expiry (by gross rent) was 1.50 years. Frasers Centrepoint Trust also reported a 2.7% year-on-year increase in overall shopper traffic in the reporting quarter.

Dr Chew Tuan Chiong, the chief executive officer of the REIT’s manager, had some comments about the quarter in the earnings release:

“We are pleased that FCT [Frasers Centrepoint Trus] has delivered steady performance for 1Q17, with higher DPU of 2.89 cents compared with 1Q16. The financial position of FCT remains strong with gearing level at 29.7% and we will continue to stay vigilant on capital market conditions and mall operations.”

He also added some words about the AEI at Northpoint:

“The AEI at Northpoint is progressing on schedule, Phase 1 of the AEI is complete and we will commence the final phase in the middle of February. We expect the occupancy of Northpoint to transition through the trough of about 57% and thereafter recover after May 2017. The AEI at Northpoint is expected to complete on schedule at the end of September 2017.”

Looking ahead, the REIT commented that conditions in Singapore in 2017 “will remain uncertain and challenging.” But, Frasers Centrepoint Trust thinks that its “well-located suburban malls are expected to remain resilient.”

Frasers Centrepoint Trust’s units closed at a price of $1.97 each last Friday. This translates to a historical price-to-book ratio of 1.02 and a distribution yield of around 6%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong owns units in Frasers Centrepoint Trust.