Frasers Commercial Trust’s Latest Earnings: Stable Distributions Seen But Market Conditions Remain Challenging

Yesterday, Frasers Commercial Trust  (SGX: ND8U) released its first quarter earnings report for its fiscal year ending 30 September 2017 (FY17). The reporting period was from 1 October 2016 to 31 December 2016.

As a quick background, the real estate investment trust (REIT) has stakes in six commercial properties located in Singapore and Australia. You can catch up with the results from the REIT’s previous quarter here.

Financial highlights

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

  1. Gross revenue inched up by 0.1% to $39.7 million in the reporting quarter.
  2. But, net property income (NPI) fell by 0.6% year-on-year to $29.2 million.
  3. Distribution per unit (DPU) for the fiscal first quarter was 2.51 cents. This was unchanged from the corresponding quarter in FY16.
  4. Frasers Commercial Trust’s property portfolio was valued at $2.0 billion, as of 31 December 2016. The trust also ended its fiscal first quarter with an adjusted net asset value per unit of $1.53, unchanged from a year ago.

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

Frasers Commercial Trust debt profile table
Source: Frasers Commercial Trust’s earnings presentation

The REIT’s average borrowing rate had declined to 2.98%. This came even as Frasers Commercial Trust increased its total borrowings to $746 million while increasing its fixed rate debt to 85%. As of 31 December 2016, the REIT’s weighted average debt to maturity was 2.3 years.

At the moment, 24% of Frasers Commercial Trust’s total debt will mature in FY17. Investors would need to watch the REIT’s progress in refinancing its borrowings.

Operational highlights

Frasers Commercial Trust’s overall portfolio occupancy stood at 93% as of 31 December 2016. Its weighted average lease expiry (by gross rent) was 3.8 years. These are slight improvements from a year ago when the self-same figures were 92.9% and 3.3 years.

Jack Lam, the chief executive of the REIT’s manager, summed up the reporting quarter with a few words in the earnings release:

“We are pleased to have delivered stable growth in distributable income for FCOT despite the challenging and uncertain market conditions in Singapore and in the wider global economy as a whole.

The stability and diversification of our portfolio has in particular been boosted by the acquisition of 357 Collins Street in August 2015, which is enjoying full occupancy in a strong Melbourne market and has no leases expiring until FY18.”

Lam also added the following statements regarding the REIT’s outlook:

“Stable results for the first quarter has given us a good start to the financial year. However, we are aware that market conditions are overall anticipated to remain challenging for some time.

We will continue to proactively manage the Trust and its property portfolio, with a view to enhancing defensiveness and income stability for Unitholders. We will also actively look at opportunities to improve and reposition the properties for them to stay competitive and enhance their marketability and long-term income potential.”

Frasers Commercial Trust’s units closed at a price of $1.28 each yesterday. This translates to a historical price-to-book ratio of 0.84 and a distribution yield of around 6.4%.

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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 doesn’t own shares in any companies mentioned.