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What Investors Should Know About Frasers Centrepoint Trust’s Latest Earnings and Valuation

Frasers Centrepoint Trust (SGX: J69U) is a real estate investment trust with a property portfolio comprising six suburban retail malls in Singapore, including Causeway Point, Northpoint City North Wing (including the Yishun 10 Retail Podium), and Changi City Point. It also holds a 31.15% stake in Hektar Real Estate Investment Trust (KLSE: 5121.KL), a retail-focused REIT in Malaysia.

There are two things about Frasers Centrepoint Trust that investors may want to know about right now: Its latest financial performance and valuation.

Financial performance

Here’s a table showing important items from Frasers Centrepoint Trust’s financial performance for the fourth quarter of its financial year ended 30 September 2017 (FY17).


Source: Frasers Centrepoint Trust’s FY17 fourth quarter earnings presentation

We can see that the REIT had a good quarter, with growth in gross revenue, net property income, income available for distribution, and distribution per unit.

Frasers Centrepoint Trust’s positive performance was driven mainly by growth from Northpoint City North WingCauseway Point, and Changi City Point.

Dr Chew Tuan Chiong, the chief executive officer of the REIT’s manager, made the following comment about the REIT’s latest quarterly performance in the earnings release:

“We are delighted that FCT has delivered a healthy set of results in 4Q17 to end FY2017 on a high note with record DPU and NAV [net asset value] per unit. FY2017 was a challenging year, especially with the slower retail market environment and the AEI [asset enhancement initiative] works at NPNW [Northpoint City North Wing] which required a lot of attention.

We are excited to commence the new financial year 2018 on a strong footing, with a rejuvenated NPNW and sustained steady performance from the properties in our portfolio. NPNW’s performance will continue to pick up progressively, as occupancy improves and rental income recovers.”

In sum, it was a good fourth quarter for the REIT and investors can expect the REIT to continue to see improvement in rental income in FY18 from Northpoint City North Wing.

Valuation

There are two useful valuation metrics for assessing REITs. They are the price-to-book (PB) ratio, and the distribution yield.

The table below shows Frasers Centrepoint Trust’s PB ratio and distribution yield. It also shows the respective averages for the two valuation metrics for the 40 REITs that are in Singapore’s stock market.


Source: SGX Stock Facts and Google Finance; data as of 17 December 2017

We can see that Frasers Centrepoint Trust is trading at a premium to the market-average based on its higher PB ratio and lower distribution yield.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.