Frasers Centrepoint Trust’s Latest Earnings: What Investors Should Know

Frasers Centrepoint Trust (SGX: J69U), or FCT, released its financial results for the third quarter ended 30 June 2017 yesterday. The reporting period was from 1 April 2017 to 30 June 2017.

Frasers Centrepoint Trust owns the following suburban retail properties in Singapore – Causeway Point, Northpoint and Yishun 10 Retail Podium, Anchorpoint, YewTee Point, Bedok Point and Changi City Point. It also has a 31.17% stake in Malaysia’s Hektar Real Estate Investment Trust (KLSE: 5121.KL), a listed retail-focused real estate investment trust (REIT) in the country. Frasers Centrepoint Ltd (SGX: TQ5) is FCT’s sponsor.

Financial highlights

With that, let’s take a look at FCT’s latest financial figures:

1. Gross revenue came in at S$43.6 million for the third quarter. This was a 3.3% year-on-year decrease. In the third quarter of 2016, gross revenue was at S$45.0 million.

2. Net property income (NPI) declined 1.3% year-on-year to S$30.8 million.

3. The reporting quarter’s distribution per unit (DPU) was at 3.00 cents, down from 3.04 cents seen in the previous corresponding quarter – a drop of 1.3%.

4. The net asset value (NAV) per unit was at S$1.92, as at 30 June 2017.

FCT said the decline in gross revenue was mainly due to “ongoing asset enhancement initiative (“AEI”) works at Northpoint. Higher revenue from Causeway Point and additional contribution from Yishun 10 Retail Podium helped to mitigate the revenue decline”.

During the quarter, the portfolio average rental reversion came in at 0.4%. The rental reversion was mainly affected by Bedok Point, which saw a 30.2% lower average rental rate for leases renewed during the period. Stripping off this mall, the other five malls in the portfolio achieved an average rental reversion of 5.4%.

As at 30 June 2017, overall portfolio occupancy was at 87.1%. This was lower as compared to the occupancy exactly one year, which came in at 90.8%. Lower occupancy at Northpoint and Yishun 10 Retail Podium, and Bedok Point primarily brought about the lower overall portfolio occupancy for the latest quarter.

Portfolio shopper traffic for the third quarter was 2.8% lower year-on-year. This was attributed to “lower traffic at Northpoint due to the planned vacancy related to the AEI works”. Meanwhile, portfolio tenant sales for the 3-month period from March to May 2017 saw a 5.9% decline year-on-year.

Source: FCT’s Earnings Presentation

As at 30 June 2017, FCT had a gearing ratio of 30%, with the average cost of borrowings at 2.2%. Even though the gearing increased from 30 September 2016, it is still well within the regulatory limit of 45%. FCT has no refinancing needs for the remaining period of 2017 Financial Year.

Dr Chew Tuan Chiong, Chief Executive Officer of the manager of FCT, said,

“The suburban retail market remains resilient as this sector focuses more on necessity spending and increasingly on food and beverages. We see higher shopper traffic at Causeway Point, Changi City Point as well as YewTee Point, compared with the same period a year ago. We expect Northpoint shopper traffic to improve as we progress towards completion of the AEI this September.

The government has announced that the Downtown Line 3 (DTL3) will open on 21 October 2017. The Expo station next to Changi City Point is one of the stations along DTL3 and we hope this will bring forth additional shopper traffic to the mall when the DTL3 commences operations. FCT has continued to deliver consistent performance for 3Q17 and its financial position remains solid. We will continue to maintain FCT’s performance and to deliver steady returns for our stakeholders.”

The REIT closed at S$2.14 on Monday, translating to a historical price-to-book ratio of 1.11 and a trailing yield of 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 Sudhan P doesn’t own shares in any companies mentioned.