On 25 April 2024, Frasers Centrepoint Trust (“FCT”) have announced their half year result for FY2024. The results are relatively stable, although DPU have dropped this half of the year. This was not unexpected given the dilution from the placements and that the acquisition was only completed at the end of the March 2024. Investors will only be able to see the benefits over the next few quarters and therefore will need to monitor.
Website: Financial Statements And Related Announcement::Second Quarter And/Or Half Yearly Results
Background
FCT is a leading developer-sponsored REIT and one of the largest suburban retail mall owners in Singapore. FCT’s property portfolio comprises nine retail malls and an office building located in the suburban regions of Singapore, near homes and within minutes to transportation amenities.
FCT is among the top-ten largest Singapore REITs (“S-REITs”) by market capitalization. It is also an index constituent of several benchmark indices including the FTSE EPRA/NAREIT Global Real Estate Index Series (Global Developed Index), FTSE ST Real Estate Investment Trust Index, MSCI Singapore Small Cap Index and the SGX iEdge S-REIT Leaders Index.
Listed on the Main Board of the Singapore Exchange Securities Trading Limited since 5 July 2006, FCT is managed by Frasers Centrepoint Asset Management Ltd., a real estate management company and a wholly owned subsidiary of Frasers Property Limited.
Key Metrics
Distribution Per Unit (“DPU”)
| Metrics | Current | Previous |
|---|---|---|
| Distribution Per Unit | -1.8% | No Info |
For the first half of FY2024, DPU have decreased by 1.8% to SGD0.0602 per share from SGD0.0613 per share for the same period in the previous financial year. The decrease was largely due to the enlarged unit based, which increased by 6.0% to 1.8 million units from 1.7 million units. The metric is Unfavorable.
Take note that there is a fall in net property income, due to Changi City Point (“CCP”) which was divested on 31 October 2023 and Tampines 1 (“T1”) which is undergoing Asset Enhancement Initiative (“AEI”). Management have disclosed that excluding CCP and T1, net property income for the six-month period ended 31 March 2024 was higher at SGD112 million, being SGD2.3 million or 2.1% higher than the corresponding period last year.
Occupancy
| Metrics | Current | Previous |
|---|---|---|
| Occupancy | 99.9% | 99.7% |
Occupancy rate as of 31 March 2024 remains unchanged at 99.9%, which is extremely close to being 100% and fully utilised. This metric is Favorable as it is above my expected healthy occupancy rate of 95%.
Gearing ratio
| Metrics | Current | Previous |
|---|---|---|
| Gearing Ratio | 38.5% | 37.2% |
The gearing ratio has increased to 38.5% as of 31 March 2024. The metric has shifted to Neutral.
Interest coverage
| Metrics | Current | Previous |
|---|---|---|
| Interest Coverage | 3.2x | 3.3x |
The adjusted interest coverage for the trailing 12 months stands at 3.2 times, a decrease from 3.3 times in the previous quarter. While it is on a downtrend, currently this is still Favorable as it is above my preference of 3.0 times. They have a margin of safety should interest rates increase, as the inflation data in April 2024 continues to suggest high inflation. This gives the Federal Reserve less incentive to lower interest rate after increasing the interest rates to a range between 5.25% and 5.50% on 26 July 2023.
Website: Wall Street pushes out rate-cut expectations, sees risk they don’t start until March 2025
I have thus performed a sensitivity analysis using the information as of 31 March 2024:
| Description | Amount (SGD’000) |
|---|---|
| Total Debt | $2,042,300 |
| Debt Not Hedged (%) | 31.5% |
| Debt at Floating Rate Exposed | $643,325 |
| Distributable Income FY2023 | $207,135 |
Interest rate sensitivity analysis as below:
| Change in Interest Rates | Decrease in Distributable Income (SGD’000) | Change as % of FY2023 Distribution |
|---|---|---|
| + 50 bps | -$3,217 | -1.6% |
| + 100 bps | -$6,433 | -3.1% |
| + 150 bps | -$9,650 | -4.7% |
| + 200 bps | -$12,866 | -6.2% |
| + 250 bps | -$16,083 | -7.8% |
| + 300 bps | -$19,300 | -9.3% |
Do note the above is my estimation which may be different from management’s estimation. Nonetheless, if the interest rates were to increase by the basis points above, FCT may experience a fall in DPU accordingly.
Debt maturity profile
| Metrics | Current | Previous |
|---|---|---|
| Debt Maturity Profile | 3.0 years | 2.8 years |
Weighted average term to maturity of their debt stands at 3.0 years as of 31 March 2024. This is Favorable as while they have sufficient time to refinance their debts as they fall due.
Price to Book Ratio
| Metrics | Current | Previous |
|---|---|---|
| Price to Book Ratio | 0.96 | 0.96 |
The Price to Book (“P/B”) ratio currently remains unchanged at 0.96. This is computed using the closing share price of SGD2.16 on 26 April 2024 and the net asset value per share of SGD2.26 as of 31 March 2024. The P/B ratio is Favorable.
Other Metrics
Tenant profile
FCT has a well-diversified tenant profile with the top 10 customers as of 31 March 2024 only account for about 21.0% of monthly portfolio gross rental income. Furthermore no single tenant accounts for more than 6.3% of FCT’s gross rental income. This is Favorable as FCT will not be too reliant on any single tenant for income.
Heartland Living
The Singapore government intend for every town to have a shopping mall available and successful. Such that they are willing to have measures to help support heartland businesses financially. This means that as an investor of retail properties, you can be assured that there will almost always be tenants for your shopping malls, which translates to rental income. It may still be subjected to capital depreciation and appreciation when exposed to economic conditions, such as the current high interest rates. However as of now, your interests are in line with the government.
Website: The Bull Case For Investing In Singapore Retail Property
Dividend Yield
| Year | Yield | Total |
|---|---|---|
| 2024 | 2.79% | SGD 0.060 |
| 2023 | 5.63% | SGD 0.122 |
| 2022 | 5.66% | SGD 0.122 |
| 2021 | 5.53% | SGD 0.092 |
| 2020 | 4.25% | SGD 0.122 |
| 2019 | 6.46% | SGD 0.140 |
The total payout for the first half of 2024 amounted to SGD0.060 per share. When annualised, the expected dividend payout will be approximately SGD0.120 per share for 2024.
With a closing share price of SGD2.16 on 26 April 2024 and dividend payout of SGD0.120 for the full calendar year 2024, this translates to a dividend yield of 5.58%. For my benchmark, a general reasonable range would be around 5.50% to 6.50%. The dividend yield is thus Favorable, although it is at the lower end of the range. This is something investors should keep an eye out on, especially with the dilution in the first half of FY2024.
Website: Reasonable Dividend Yield 2024Q2
Summary
| Metrics | Financials | Rating |
|---|---|---|
| Distribution Per Unit | -1.8% | Unfavorable |
| Occupancy | 99.9% | Favorable |
| Gearing Ratio | 38.5% | Neutral |
| Interest Coverage | 3.2x | Favorable |
| Debt Maturity Profile | 3.0 years | Favorable |
| Price to Book Ratio | 0.96 | Favorable |
| Overall | | Favorable |
Overall, the metrics indicate that it remains favorable to invest in FCT this quarter. They ae still relatively stable, although we see a net decrease in DPU due to the dilution. This might improve over the next few quarters when the results from the completed acquisition start to flow into FCT.
Disclaimer: Not financial advice. All data and information provided on this site is for informational purposes only.
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Website: Frasers Centrepoint Trust (SGX: J69U): 2024 First Quarter Business Update
