Frasers Centrepoint Trust’s Latest Earnings: Running to Stand Still

Yesterday, Frasers Centrepoint Trust  (SGX: J69U) released its second quarter earnings report for its financial year ending 30 September 2017 (FY2017). 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 sub-urban shopping malls in Singapore. Two of these malls – Causeway Point and Northpoint – make up a significant portion of Frasers Centrepoint Trust’s income. The REIT also holds a 31.2% stake in the Malaysia-listed Hektar Real Estate Investment Trust.

You can catch up with the results from Frasers Centrepoint Trust’s previous quarter here.

Financial highlights

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

  1. Gross revenue came in at $45.7 million in the reporting quarter, down 2.9% from the same quarter a year ago.
  2. Net property income (NPI) declined by 3.3% year-on-year to $32.6 million.
  3. The share of associate’s results (operations), which covers Frasers Centrepoint Trust’s ownership stake in H-REIT, fell 13.4% from $1.1 million in FY2016’s second quarter to around $0.94 million in the reporting quarter.
  4. Distribution per unit (DPU) for the second quarter of FY2017 was 3.04 cents per unit, which was unchanged from the corresponding quarter a year ago.
  5. Frasers Centrepoint Trust’s property portfolio was valued at $2.56 billion as of 31 March 2017. The REIT reported a net asset value per unit of $1.93 for the reporting quarter, up slightly from $1.91 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. Frasers Centrepoint Trust’s debt profile is summarized below.

2017-04-26 Frasers Centrepoint Trust Debt Table
Source: Fraser Centrepoint Trust’s earnings presentations

Total borrowings increased to $777 million compared to $724 million a year ago. Along with it, the REIT’s gearing stepped up slightly to 29.4%. As of 31 March 2017, the REIT’s weighted average debt to maturity was 2.4 years.

The cost of borrowing was 2.2% in the reporting quarter, an improvement from the 2.286% recorded on 31 March 2016. Frasers Centrepoint Trust’s interest coverage improved alongside the lower financing cost.

The REIT has around 24.6% of its debt coming due in FY2017. This is worth keeping an eye on.

Operational highlights

Frasers Centrepoint Trust’s gross revenue fell mainly due to lower revenue from Northpoint. The mall is undergoing an asset enhancement initiative which began on March 2016. The expected completion for the upgrading works is September 2017.

In the reporting quarter, the REIT achieved an overall portfolio occupancy rate of 87.2%, which is down from the 92.0% seen in the first quarter of 2016. Of the REIT’s six properties, Bedok Point continues to be the laggard of the group with an occupancy rate of 83.2%. Due to the aforementioned AEI, Northpoint recorded an occupancy rate of 60.7% for the reporting quarter. The weighted average lease expiry (by gross rent) was 1.62 years.

Overall shopper traffic at Frasers Centrepoint Trust’s malls decreased by 3.5% on a year-on-year basis during the reporting quarter. Although, the REIT managed to achieve a positive rental reversion of 4.1%.

Dr Chew Tuan Chiong, the chief executive officer of the REIT’s Manager, shared his thoughts on the quarter in the earnings release:

“FCT [Frasers Centrepoint Trust] has continued to deliver consistent performance and a steady DPU of 3.04 cents for 2Q17.

Our financial position remains solid with low gearing level of 29.4%. We will continue to focus on improving our mall performance and to deliver steady performance for our stakeholders.”

Frasers Centrepoint Trust’s units closed at $2.11 each yesterday. This translates to a historical price-to-book ratio of 1.09 and a distribution yield of around 5.5%.

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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.