Following its AGM last Thursday (21 January 2021) morning (when I’ve attended and posted a summary of it here), suburban retail REIT Frasers Centrepoint Trust (SGX:J69U) released its business updates for the first quarter of the financial year 2020/21 (the period under review was between 01 October and 31 December 2020) in the evening.

As the REIT has shifted to half-yearly reporting, no financial figures were reported in its latest updates. There were only updates on its portfolio occupancy as well as its debt profile, and you’ll find an analysis of both of them in this post – where I’ll be comparing its latest quarter statistics against the previous quarter (i.e. Q4 FY2019/20 ended 30 September 2020), as well as against the same time period last year (i.e. Q1 FY2019/20 ended 30 December 2019) to find out if they have improved or deteriorated, along with my personal thoughts peppered throughout the post to share.

Let’s get started…

Portfolio Occupancy Profile (Q4 FY2019/20 vs. Q1 FY2020/21, and Q1 FY2019/20 vs. Q1 FY2020/21)

Q4 FY2019/20 vs. Q1 FY2020/21:

First, let us compare the REIT’s portfolio occupancy profile recorded for the current quarter under review (i.e. Q1 FY2020/21 ended 30 December 2020), compared against its portfolio occupancy profile 3 months ago (i.e. Q4 FY2019/20 ended 30 September 2020) to find out whether or not there are any improvements recorded (for both quarters, Singapore is largely in Phase 2 of the safe transition; Phase 3 only commenced on 28 December 2020):

Q4 FY2019/20Q1 FY2020/21
Portfolio Occupancy
(%)
94.9%96.4%
Portfolio WALE
(by NLA – in Years)
1.6 years1.4 years

My Thoughts: Its encouraging to note that the REIT’s overall portfolio occupancy rate recording some slight improvements (by 1.5 percentage points) 3 months on, as almost all retail operations are allowed to resume operations (albeit with the necessary safe distancing measures in place) following Singapore’s transition into Phase 2 of the safe reopening on 19 June 2020.

Q1 FY2019/2020 vs. Q1 FY2020/21:

Let us now take a look at the REIT’s portfolio occupancy profile for the current quarter under review compared against the same time period last year (i.e. Q1 FY2019/20 ended 30 December 2019), which was before the outbreak of the Covid-19 pandemic in Singapore:

Q1 FY2019/20Q1 FY2020/21
Portfolio Occupancy
(%)
97.3%96.4%
Portfolio WALE
(by NLA – in Years)
1.8 years1.6 years

My Thoughts: As you can see from the above, even though there are some recovery 3 months on (when I looked at the REIT’s portfolio occupancy profile recorded in the current quarter under review against the previous quarter 3 months before), but its portfolio occupancy rate is still lower compared to pre-Covid period.

Moving forward, I am of the opinion that in the quarters ahead, we should see the REIT’s portfolio occupancy to record further improvements, even though it will likely be a slow one, and also provided that Singapore does not see a resurgence in the number of community cases and a re-tightening of measures.

Debt Profile of Frasers Centrepoint Trust (Q4 FY2019/20 vs. Q1 FY2020/21, and Q1 FY2019/20 vs. Q1 FY2020/21)

In this section, let us take a look at the suburban retail REIT’s debt profile – just like its portfolio occupancy profile in the previous section, I will also be comparing its debt profile for the current quarter under review against its debt profile recorded 3 months ago (i.e. Q4 FY2019/20 ended 30 September 2020), as well as against its debt profile recorded a year ago (i.e. Q1 FY2019/20 ended 31 December 2019):

Q4 FY2019/20 vs. Q1 FY2020/21:

Q4 FY2019/20Q1 FY2020/21
Aggregate Leverage
(%)
35.9%37.7%
Interest Coverage
Ratio (times)
5.0x4.7x
Average Term to
Debt Maturity (years)
2.1 years3.0 years
Average Cost of
Debt (%)
2.4%2.2%

My Thoughts: It is good to note that the REIT’s average cost of debt have been reduced slightly, along with its average term to debt maturity going up at the same time, 3 months on.

Q1 FY2019/20 vs. Q1 FY2020/21:

Q1 FY2019/20Q1 FY2020/21
Aggregate Leverage
(%)
33.2%37.7%
Interest Coverage
Ratio (times)
5.9x4.7x
Average Term to
Debt Maturity (years)
2.5 years3.0 years
Average Cost of
Debt (%)
2.6%2.2%

My Thoughts: The situation is similar to 3 months ago (i.e. Q4 FY2019/20 vs. Q1 FY2020/21), where the REIT’s average cost of debt was reduced by 0.4 percentage points to 2.2%, along with its average term to debt maturity going up (to 3.0 years.)

Even though its aggregate leverage have went up by 4.5 percentage points to 37.7%, it is still a good distance away from the regulatory limit of 50.0%, and hence there remains plenty of debt headroom for the REIT to make further yield-accretive acquisitions should opportunities to do so comes along.

In Conclusion

Personally, I am satisfied with the REIT’s latest portfolio occupancy and debt profile, and optimistic that as long as the Covid-19 pandemic remains under control in Singapore, we should continue to see further improvements in the quarters ahead as far as its portfolio occupancy profile is concerned.

As for its debt profile, I find it to be resilient, with plenty of debt headroom (before it reaches the regulatory limit of 50.0%.)

Finally, in case you’re wondering, there are no distribution payouts declared for the current quarter under review as the REIT has changed to declaring a distribution payout to its unitholders on a half-yearly basis.

With that, I have come to the end of my review of the REIT’s latest business update. Please note that all opinions above are purely my own and they do not imply any buy or sell recommendation for the REIT’s units. You should always do your own due diligence before you make any investment decisions.

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Disclaimer: At the time of writing, I am a unitholder of Frasers Centrepoint Trust.

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