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3 Things Frasers Commercial Trust’s Management Wants You To Know About Its Business

In late April, Frasers Commercial Trust (SGX: ND8U) released its second quarter earnings update for its fiscal year ending 30 September 2018 (FY2018). The reporting period was from 1 January 2018 to 31 March 2018.

As a quick introduction, Frasers Commercial Trust is a REIT that owns seven commercial properties in Singapore (three), Australia (three), and the United Kingdom.

The Manager of Frasers Commercial Trust had given a presentation on the REIT’s latest results. In the presentation deck, I saw three slides on the REIT’s business that I think investors should pay attention to.

The first slide shows a high-level summary of the REIT’s income statement for the second quarter of FY2018:


Source: Frasers Commercial Trust FY2018 second quarter earnings presentation

We can see that the REIT had a poor quarter as gross revenue, net property income, and distribution per unit (DPU) all fell compared to a year ago.

Frasers Commercial Trust attributed its net property income decline to lower occupancy rates in a number of its properties, a weaker Australian dollar, and higher expenses for one of its Australian properties, Caroline Chisholm Centre.

The next slide I want to discuss shows a breakdown of the REIT’s net property income by property:


Source: Frasers Commercial Trust FY2018 second quarter earnings presentation

We can observe that the REIT’s properties all delivered lower net property income in the quarter with the exception of the UK property, Farnborough Business Park (the building was acquired on late January 2018).

As mentioned earlier, lower occupancy rates at Frasers Commercial Trust’s properties was one of the main reasons that affected the REIT’s net property income. But for Alexandra Technopark and China Square Central, their lower vacancies were for a good reason: The REIT’s carrying out asset enhancement initiatives on them.

The last slide I want to talk about shows the REIT’s lease expiry profile:


Source: Frasers Commercial Trust FY2018 second quarter earnings presentation

The lease expiry profile is an important thing to study for a REIT as it gives us clues on how stable the REIT’s rental income may be.

We can see that Frasers Commercial Trust has a fairly well-distributed lease expiry profile, with 46.8% of its leases (by rental income) expiring between 2018 and 2020. As of 31 March 2018, the REIT also had a reasonable weighted average lease to expiry of 4.0 years.

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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.