Frasers Centrepoint Trust (SGX:J69U) is a pure-play Singapore REIT in that all of its properties (10 suburban malls, and 1 office property) are all located in the country.
This morning (26 April 2023), the predominantly suburban retail mall REIT have made available its financial results for the first half of the financial year 2022/23 ended 31 March 2023 (the REIT has a financial year ending every 30 September.)
As a unitholder of the Singapore-listed REIT, I have studied its results and in this post, you’ll find my review of its latest set of financial results, portfolio occupancy and debt profile, and also its distribution payout to unitholders.
Let’s begin:
Financial Performance (1H FY2021/22 vs. 1H FY2022/23)
The REIT reports its financial figures once every half-yearly, and as such, there are no quarterly figures to look at.
In this section, I’ll be comparing its results reported for the first half of FY2022/23 against that reported a year ago (i.e. the first half of FY2021/22), and you can find them in the table below:
| 1H FY2021/22 | 1H FY2022/23 | % Variance | |
| Gross Revenue (S$’mil) | $176.2m | $187.6m | +6.5% |
| Property Operating Expenses (S$’mil) | $45.7m | $49.6m | +8.6% |
| Net Property Income (S$’mil) | $130.5m | $138.0m | +5.7% |
| Distributable Income to Unitholders (S$’mil) | $104.4m | $104.7m | +0.3% |
My Observations: A stable set of results reported by the suburban retail mall REIT in my opinion for the first half of FY2022/23, compared against the same time period last year – with its gross revenue and net property income up by mid-single digit percentage, contributed by higher staggered rent, higher rental achieved for lease renewals, and higher atrium income with the resumption of atrium events from 29 March 2022.
On the other hand, property expenses climbed by 8.6% as a result of higher reimbursement of staff costs and higher market expenses during the period.
Portfolio Occupancy Profile (Q1 FY2022/23 vs. Q2 FY2022/23)
Moving on, let us take a look at the REITs portfolio occupancy profile – where I will be comparing the stats reported for the second quarter of FY2022/23 ended 31 March 2023 against that reported in the previous quarter 3 months ago (i.e. the first quarter of FY2022/23 ended 31 December 2022) to find out whether it has continued to remain resilient:
| Q1 FY2022/23 | Q2 FY2022/23 | |
| Portfolio Occupancy (%) | 98.4% | 99.2% |
| Portfolio WALE (by NLA – years) | 1.9 years | 1.9 years |
| Portfolio WALE (by Gross Rent – years) | 1.8 years | 1.8 years |
My Observations: The REIT’s overall portfolio occupancy profile remains more or less the same compared to the last quarter – the only thing is the occupancy going up by 0.8 percentage points (pp), contributed by a strong 8.1pp jump in occupancy rate of Century Square (from 88.7% in Q1 FY2022/23 to 96.8% in Q2 FY2022/23, as the REIT managed to find a tenant for its cinema space – in Cathay Cineplexes), Changi City Point (up by 97.8% in Q1 FY2022/23 to 99.0% in Q2 FY2022/23), and Central Plaza Office (from 90.2% in Q1 FY2022/23 to 94.0% in Q2 FY2022/23.)
Another thing to note is that, all of its properties are more than 95.0% occupied (except Central Plaza Office), which is encouraging to note.
Debt Profile (Q1 FY2022/23 vs. Q2 FY2022/23)
As far as reviewing a REIT’s debt profile is concerned, I will also be comparing the stats reported in the current quarter under review (i.e. Q2 FY2022/23 ended 31 March 2023) against that reported in the previous quarter 3 months ago (i.e. Q1 FY2022/23 ended 31 December 2022) to find out if it has continued to remain healthy:
| Q1 FY2022/23 | Q2 FY2022/23 | |
| Aggregate Leverage (%) | 33.9% | 39.6% |
| Interest Coverage Ratio (times) | 4.7x | 4.4x |
| Average Term to Debt Maturity (years) | 1.8 years | 1.9 years |
| Average Cost of Debt (%) | 3.5% | 3.6% |
| % of Borrowings Hedged at Fixed Rates (%) | 73% | 76% |
My Observations: The 5.7pp jump in its aggregate leverage (to 39.6%) is attributed to bank borrowings to finance the acquisitions of the effective 25.5% interest in NEX, and the additional 10.0% interest in Waterway Point, which were completed on 06 February and 08 February 2023 respectively.
In terms of its debt maturity profile, they were spread out over the next couple of years – with S$391.0m (of 17.7%) of borrowings due for refinancing in the 2nd half of the current financial year 2022/23, S$387m (or 17.5%) of borrowings due for refinancing in FY2023/24, S$511.0m (or 23.1%) of borrowings due for refinancing in FY2024/25, and the remaining S$922.8m (or 41.7%) of borrowings due for refinancing in FY2025/26 and beyond.
However, with just 76% of its borrowings hedged to fixed rates, coupled with the REIT having about 35.2% of borrowings due for refinancing over the next 2 financial years (from now till end of FY2023/24), and the fact that interest rates will continue to remain high till 2025 (in my opinion), its cost of borrowings is likely to go up further in the coming quarters, and its distribution payout to unitholders being impacted somewhat.
Distribution Payout to Unitholders (1H FY2021/22 vs. 1H FY2022/23)
The management of Frasers Centrepoint Trust declares a distribution payout to unitholders on a half-yearly basis – for the current period under review (i.e. 1H FY2022/23), a distribution payout of 6.130 cent/unit was declared.
Compared to its distribution payout of 6.136 cents/unit declared in the same time period last year (i.e. 1H FY2021/22), this represents a very slight 0.1% dip.
If you are a unitholder of the REIT, do take note of the following dates regarding its distribution payout:
Ex-Date: 04 May 2023
Record Date: 05 May 2023
Payout Date: 30 May 2023
CEO Mr Richard Ng’s Comments & Outlook (from the REIT’s Press Release)
“FCT has benefitted from the continued recovery following Singapore’s transition to the COVID-19 endemic phase and delivered a very healthy set of results. Despite the headwinds from rising interest rates and operating costs, we saw good traction in lease renewals and signing of new tenants amidst improved retailer sentiments and healthy consumer spending. We also see an increasing trend of consumers prioritising their spending on essential goods and services, which bodes well for FCT’s retail portfolio.
The acquisitions of the 25.5% interest in NEX and additional 10.0% interest in Waterway Point which we completed in February 2023 provide additional growth for FCT going forward. We are also looking at growth opportunities through further acquisitions and asset enhancement initiatives. We believe the suburban retail sector remains an attractive asset class and FCT is well-positioned to thrive in the new normal of the endemic phase.”
Closing Thoughts
No doubt its debt profile have weakened compared to the previous quarter 3 months ago, but its aggregate leverage, at 39.6%, still have some debt headroom to go before the regulatory level of 50.0% is reached.
Apart from that, its portfolio occupancy is very resilient (where apart from Central Plaza Office, all of its retail properties are more than 95.0% occupied), and its financial results growth was pretty much within my expectations – no doubt the REIT have completed the 25.5% acquisition of NEX in early-February, but from then till the end of the 2nd quarter on 31 March, the contributions is minimal. It should have a more material contribution in the quarters to come.
With that, I have come to the end of my review of Frasers Centrepoint Trust’s results for the first half of the financial year ended 31 March 2023. Do note that all the opinions within are purely mine based on my observations, which I’m sharing for educational purposes only. They do not constitute any buy or sell calls for the REIT’s units. As always, please do your own due diligence before you make any investment decisions.
Related Documents
Disclaimer: At the time of writing, I am a unitholder of Frasers Centrepoint Trust.
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