After market hours yesterday (22 July 2021), Frasers Centrepoint Trust (SGX:J69U), with with 9 heartland malls scattered across Singapore, along with one office property (Central Plaza located beside Tiong Bahru Plaza), released its business update for the third quarter of financial year 2020/21 ended 30 June 2021.

As the retail REIT have switched to half-yearly reporting (along with switching its frequency of distribution payout to semi-annual basis), for the current quarter under review, there weren’t any profit or loss and distribution statements reported. Hence, in today’s post, my focus will be on its portfolio occupancy and debt profile – where I’ll be comparing the statistics reported for the current quarter against that reported 3 months ago (i.e. for the second quarter of FY2020/21 ended 31 March 2021) to find out if it has improved, deteriorated, or remained more or less the same…

Portfolio Occupancy Profile (Q2 FY2020/21 vs. Q3 FY2020/21)

Q2 FY2020/21Q3 FY2020/21
Portfolio Occupancy
(%)
96.1%96.4%
Portfolio WALE
(by NLA* – in Years)
1.5 years1.6 years
Portfolio WALE
(by GRI* – in Years)
1.5 years1.6 years
* NLA refers to Net Lettable Area, while GRI refers to Gross Rental Income.

My Observation: Compared to the previous quarter, its portfolio occupancy has more or less remained the same. The slight improvements in the portfolio occupancy rate (by 0.3 percentage points, or pp, to 96.4%) can be attributed to improvements in the portfolio occupancy rates of Northpoint City North Wing, which includes Yishun 10 (by 1.8pp to 99.7% from 97.9%), Waterway Point (by 1.6pp to 93.8% from 92.2%), and Tampines 1 (by 7.3pp to 99.2% from 91.9%), while the other malls, including its office property, reporting a lower occupancy rate compared to the previous quarter.

In terms of lease renewals for the final quarter of FY2020/21, 8% of the leases are due for renewal.

Debt Profile (Q2 FY2020/21 vs. Q3 FY2020/21)

Q2 FY2020/21Q3 FY2020/21
Aggregate Leverage
(%)
35.2%33.9%
Interest Coverage
Ratio (times)
5.0x5.2x
Average Term to Debt
Maturity (years)
2.6 years2.8 years
Average Cost of
Debt (%)
2.2%2.2%

My Observations: I’m encouraged to note that on the whole, the retail REIT’s debt profile for the quarter under review have further strengthened compared to the previous quarter.

One thing I particularly like is its aggregate leverage, where, at 33.9% as at 30 June 2021, there remains ample of debt headroom before the regulatory limit of 50.0% is reached – and this allows the REIT to make further yield accretive acquisitions as and when an opportunity comes along.

Another thing to note is that, the REIT only has S$210.5m (or 11.3%) of its total borrowings maturing in the next financial year 2021/22, with no borrowings maturing in the final quarter of the current financial year.

Closing Thoughts

Personally, I felt that both its portfolio occupancy and debt profile continue to remain resilient.

No doubt Singapore is currently back in Phase 2 (Heightened Alert) once again due to a resurgence in the number of Covid-19 cases in the community, my opinion is that Frasers Centrepoint Trust will not be badly affected (compared to those located around the CBD area) as the REIT’s malls are all located in heartland areas, and people residing in the respective neighbourhood will continue to visit the malls to shop for basic necessities (particularly food and groceries.)

Unless or otherwise the restrictions were to tighten and Singapore were to re-implement the ‘circuit breaker’ once again, I am confident of the REIT reporting a resilient set of second half and full-year results ahead.

With that, I have come to the end of my review of Frasers Centrepoint Trust’s latest business updates. Please note that everything that you have just read above is solely my personal opinion, and they do not represent any buy or sell call for the REIT’s units. As always, you should 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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