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Frasers Commercial Trust’s Latest Earnings: Steady Growth Seen

Frasers Commercial Trust  (SGX: ND8U) released its fiscal second quarter earnings for its financial year ending 31 September 2017 (FY2017) this morning. The reporting period was from 1 January 2017 to 31 March 2017.

As a quick background, the real estate investment trust (REIT) has ownership stakes in six commercial properties located in Singapore and Australia. This includes commercial properties such as China Square Central and Alexandra Technopark in Singapore.

You can catch up with the REIT’s fiscal first quarter earnings here.

Financial highlights

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

1. Gross revenue rose to $40.2 million in the reporting quarter, up 3.2% from the same quarter a year ago.

2. Net property income (NPI) also climbed by 4.1% year-on-year to $30.0 million.

3. Distribution per unit (DPU) for FY2017’s second quarter was 2.51 cents. This is up 2% from the corresponding quarter last year.

4. Frasers Commercial Trust’s property portfolio was valued at around $2.0 billion, as of 31 March 2017. The REIT ended the reporting quarter with an adjusted net asset value per unit of $1.54, a slight increase from the $1.53 seen a year ago.

Let’s look at Frasers Commercial Trust’s debt profile next:

2017-04-21 Frasers Commercial Trust Debt Table
Source: Frasers Commercial Trust’s earnings presentations

The REIT’s debt profile did not change much from a year ago. One noticeable change would be the widening of its fixed rate borrowings to 91%. As of 31 March 2017, the REIT’s weighted average debt to maturity is 2.5 years. There is $80 million in borrowings coming due in FY2017.

Operational highlights and a future outlook

Frasers Commercial Trust’s overall portfolio occupancy rate stood at 91.8%, as of 31 March 2017, a slight decline from the 92.6% seen a year ago. Its weighted average lease expiry (based on gross rental) was 3.7 years. It also managed to enjoy a positive rental reversion of 3.6% during the reporting quarter.

Jack Lam, the chief executive officer of Frasers Commercial Trust’s Manager, summed up the quarter with a few words:

“We are pleased to deliver another healthy set of results and stable DPU performance notwithstanding continued challenges and uncertainties in the market environment.”

In its earnings release, Frasers Commercial Trust shared the state of its markets. In Singapore’s office market, the REIT mentioned that “CBRE Research believes that there is potential for rental growth by end-2017 and a more sustained market recovery in 2018, although the recovery is expected to be mixed.”

On the Singapore business park market, the REIT mentioned there “will be a supply gap from 2017 until mid-2018 and this will bode well for occupancy in the medium term.”

As for the Australian market, Colliers International expects the vacancy rate of Perth’s CBD (Central Business District) office market to rise to 24.2% by mid-2018. Melbourne’s CBD office market has much brighter prospects though – the REIT commented that the “prime net face rent is forecast to record average growth of 5.0% per annum over the next two years.”

Frasers Commercial Trust’s units opened at $1.33 each this morning. This translates to a historical price-to-book ratio of 0.86 and a distribution yield of around 7.4%.

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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.