1O Quick Things to Learn from Frasers Centrepoint Trust’s Latest AGM

From time to time, Foolish hats turn up at annual general meetings (AGM).

As a unitholder of Frasers Centrepoint Trust (SGX: J69U), I had the opportunity to attend the real estate investment trust’s AGM on 23 January 2018. The REIT focuses on retail properties and owns Causeway Point, Northpoint City North Wing (including the Yishun 10 retail podium), Changi City Point, Bedok Point, YewTee Point, and Anchorpoint.

Here are 10 important things I picked up during the AGM:

1. Philip Eng, the chairman of Frasers Centrepoint Trust’s manager, kicked off the AGM proceedings. Eng said two independent non-executive directors, Bobby Chin and Soh Kim Soon, have stepped down as part of the board renewal process and to comply with regulatory requirements. Both Chin and Soh have served the REIT’s manager since 2006.

2. From there, Dr Chew Tuan Chiong, the chief executive officer (CEO) of the REIT’s manager, presented a short summary of the REIT’s fiscal year ended 30 September 2017 (FY20717). To start, he said that there wasn’t any major changes in terms of the properties under management, save for the minor addition of the 10 Yishun retail podium.

3. But, Chew added that the retail environment at Frasers Centrepoint Trust’s malls were not static. The Expo MRT station, where Changi City Point is located, has turned into an interchange with a new connection to the Downtown Line. Bedok Point, which has been struggling, faces new competition from the Bedok Central area. Meanwhile, Anchor Point is experiencing a revival from the launch of new condominiums nearby.

4. Causeway Point and Northpoint City North Wing are the most important malls to Frasers Centrepoint Trust; they collectively account for almost 70% of the REIT’s revenue. For Causeway Point, Chew said that the area around the mall is developing fast with Woodlands MRT station turning into an important hub; The Thompson East Coast Line is expected to connect with the Woodlands MRT station once it is completed, and the interchange has been earmarked as a station that connects to Johor Bahru in the future. Chew also added that Northpoint City North Wing has undergone a significant asset enhancement initiative (AEI). There will be more on this below.

5. There were also developments at Hektar REIT (KLSE:5221.KL), a Malaysia-based retail REIT that Frasers Centrepoint Trust has a 31.15% stake in. A new mall, Segamat Central in Johor Bahru, was added to Hektar REIT in the latest fiscal year. Chew commented that Hektar REIT accounted for a minor 3% of Frasers Centrepoint Trust’s total portfolio.

6. Moving on to financial performance, Chew said that Frasers Centrepoint Trust’s results for the last two fiscal years had been hampered by the AEI works at Northpoint City North Wing, which is the REIT’s second largest mall. Nevertheless, the REIT managed to keep its net property income (NPI) relatively stable, and pay out a distribution per unit (DPU) of 11.90 cents in FY2017, its highest-ever annual payout.  

7. At the end of FY2017, Frasers Centrepoint Trust’s net asset value rose to S$2.02 per unit, up from S$1.93 a year ago. The REIT also kept its gearing at 29%, one of the lowest among Singapore’s REITs.           

8. Opportunities to acquire good suburban malls of a reasonable size are rare, said Chew. In this context, the REIT was fortunate to acquire the Yishun 10 retail podium. The acquisition, which cost about S$38 million, consists of the retail units within the property. Yishun 10 sits at a corner next to Northpoint City North Wing, making it a candidate to be absorbed into the larger mall over the long-term. At the moment, the REIT sees it as a strategic land-bank which provides an accretive yield.

9. Chew also spent time to talk about the changes at Northpoint City North Wing. After the AEI, the mall owned by the REIT is now seamlessly connected to Northpoint City South Wing, which is owned by Frasers Property Ltd (SGX: TQ5), the sponsor of the REIT. The average rental per square foot at Northpoint City North Wing rose by 9% after the AEI.

10. On a final note, Frasers Centrepoint Trust has been able to achieve positive rental reversions since FY2007. The REIT managed a 5.1% reversion in FY2017, which indicates how much the average rental for new leases has risen compared to rental rates three years ago. Chew said the achievement is respectable in the context of the wider market, but acknowledged that the 5.1% rate is also the lowest ever reversion in the REIT’s history. He said that the low figure is an indication of the market cycle, and that the REIT will have to do its best to ride it out.    

To close his presentation, Chew joked about the amount of stress that an AEI puts on his team as it has to try its best to maintain the REIT’s DPU while the renovations are ongoing. The AEI is over, he said, and there are no renovations planned for FY2018. The REIT is looking forward to get Northpoint City North Wing’s occupancy rate back up to 99%, and to enjoy a fruitful year ahead.

If you would like to learn more Frasers Centrepoint Trust, I took some notes on its AGM last year, which you can find here. I also have notes from the REIT”s annual report last year that you can find here and here.     

We believe we've identified a REIT dividend dynamo whose financials are strong enough to qualify its dividend as "safe" - and have profiled this stock in a research report that's now available to download completely free of chargeSimply click here to claim your copy today!

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.