Frasers Centrepoint Trust (SGX:J69U), with a total of 11 retail malls located in suburban locations in Singapore, posted its financial results for the first half of the financial year 2020/21 ended 31 March 2021 last Friday (23 April 2021) morning before trading hours.

As a unitholder of the retail REIT, I have studied the documents posted to receive the latest updates and in this post, you will find key aspects about the REIT’s latest set of financial performance, debt and portfolio occupancy profile, and its distribution payout to unitholders to take note of, along with my thoughts to share.

Let’s begin…

Financial Results (1H FY2019/20 vs. 1H FY2020/21)

As the REIT have switched to half-yearly reporting, it did not provide any updates on its financial performance when it posted its business updates for the first quarter (you can check out the post I’ve written when the REIT posted its business updates for Q1 FY2020/21 back in late-January 2021 here.)

The following table is the REIT’s financial results for the first half of the financial year 2020/21 (period between 01 October 2020 and 31 March 2021), compared against the same time period last year (i.e. for the first half of the financial year 2019/20 between 01 October 2019 and 31 March 2020):

1H FY2019/201H FY2020/21% Variance
Gross Revenue
(S$’mil)		$99.9m$173.6m+73.8%
Property Operating
Expenses (S$’mil)		$27.6m$48.0m+73.5%
Net Property
Income (S$’mil)		$72.3m$125.7m+73.8%
Distributable
Income to
Unitholders (S$’mil)		$52.2m$101.1m+93.7%

At one glance, I am sure you’ll agree with me that the retail REIT’s latest set of financial results was a much improved one compared to last year, and this is due to the inclusion of revenue contribution from the newly acquired properties from AsiaRetail Fund Limited on 27 October 2020, namely Tiong Bahru Plaza, White Sands, Hougang Mall, Century Square, Tampines 1, and Central Plaza.

At the same time, the jump in the REIT’s property operating expenses (by 73.5% on a year-on-year, or y-o-y, basis) was due to the property expenses incurred by the newly acquired properties (as mentioned in the previous paragraph.)

Debt Profile (Q1 FY2020/21 vs. Q2 FY2020/21)

In this section, let us take a look at the debt profile reported by the REIT for the quarter ended 31 March 2021 (i.e. Q2 FY2020/21), compared against that reported three months ago (i.e. Q1 FY2020/21 ended 31 December 2020) to find out if it has improved or deteriorated:

Q1 FY2020/21Q2 FY2020/21
Aggregate Leverage
(%)		37.7%35.2%
Interest Coverage
Ratio (times)		4.7x5.0x
Average Term to
Debt Maturity (years)		3.0 years2.6 years
Average Cost of
Debt (%)		2.2%2.2%

My Thoughts: Personally, I felt that the REIT’s debt profile have improved from the previous quarter, due to its aggregate leverage improving by 2.5 percentage points (pp) to 35.2% (and at this level, there remains plenty of debt headroom for the REIT to make further yield-accretive acquisitions before it reaches the regulatory limit of 50.0%), and at the same time, its interest coverage ratio have also improved to 5.0x.

I also noted from the REIT’s presentation slides that for the remainder of the current financial year 2020/21, only 2.5% (or S$50.0m) of its total borrowings are maturing, which is pretty minimal in my opinion.

All in all, its latest set of debt profile statistics is one I am comfortable with as a unitholder of the REIT.

Portfolio Occupancy (Q1 FY2020/21 vs. Q2 FY2020/21)

Similar to how I studied the retail REIT’s debt profile in the previous section, I will also be looking at its portfolio occupancy profile recorded in the current quarter under review (i.e. Q2 FY2020/21), and compare it against that recorded in the previous quarter three months ago (i.e. Q1 FY2020/21):

Q1 FY2020/21Q2 FY2020/21
Portfolio Occupancy
(%)		96.4%96.1%
Portfolio WALE
(by NLA – years)		1.6 years1.5 years
Portfolio WALE
(by Gross Rent – years)		1.5 years1.5 years

My Observations: The REIT’s overall portfolio occupancy rate dipped slightly by 0.3pp to 96.1%, mainly attributed by a drop in occupancy rate in Waterway Point (from 98.1% in Q1 FY2020/21 to 92.2% in Q2 FY2020/21), and in Tampines 1 (from 94.2% in Q1 FY2020/21 to 91.9% in Q2 FY2020/21) due to the exit of anchor tenants. From the REIT’s presentation slides, negotiations are currently ongoing for replacement tenants.

Portfolio WALE (Weighted Average Lease Expiry) both by its NLA (Net Lettable Area), as well as by its gross rent, remained consistent.

Distribution Per Unit

While the total distribution per unit for the first half of the financial year 2020/21 was 5.996 cents/unit, 0.132 cents/unit (being the distributable income accrued by the REIT immediately preceding the issuance of new units under the private placement on 07 October 2020) was already paid out to unitholders on 04 December 2020.

The remaining 5.864 cents/unit payout will go ex-dividend on 30 April 2021, with record date on 03 May 2021, and payout date on 28 May 2021.

Compared against the distribution payout in the same time period last year (which was 4.67 cents/unit, comprising of 3.06 cents/unit paid out in the first quarter and 1.61 cents/unit paid out in the second quarter), the REIT’s distribution per unit on a y-o-y basis saw a 28.4% jump.

Closing Thoughts

In my opinion, the only slight negative in the REIT’s latest set of results update is in its portfolio occupancy – which dipped slightly compared to the previous quarter; however, all its properties saw its occupancy rate maintained at above 90.0%.

Apart from that, as a unitholder of the retail REIT, I am satisfied with its latest set of results.

Related Documents

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

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