Frasers Centrepoint Trust’s (SGX:J69U) property portfolio consists predominantly of heartland retail malls (the only property in its portfolio that’s not a retail mall is Central Plaza, which was added post the REIT’s acquisition of AsiaRetail Fund Limited.) Its properties are all located in Singapore.
With the pandemic still ongoing for most parts of the financial year, along with many continuing to work from home during the period, heartland malls have thrived, with many people visiting them for basic necessities such as food (from foodcourts and/or restaurants), groceries (from supermarkets), as well as medicine (from pharmacies.)
Following the end of the financial year 2020/21 on 30 September 2021, this morning (27 October 2021), the REIT released its financial results for the second half, as well as for the full-year – which we will be taking a look at in today’s post, together with its latest portfolio occupancy and debt profile (which I will be comparing against that recorded in the previous quarter ended 30 June 2021), and its distribution payout to unitholders for the second half of FY2020/21:
Financial Results (2H FY2019/20 vs. 2H FY2020/21, and FY2019/20 vs. FY2020/21)
In this section, I will first be reviewing the REIT’s results on a quarter-on-quarter (q-o-q) basis (i.e. 2H FY2019/20 vs. 2H FY2020/21), followed by its results on a year-on-year (y-o-y) basis (i.e. FY2019/20 vs. FY2020//21):
2H FY2019/20 vs. 2H FY2020/21:
| 2H FY2019/20 | 2H FY2020/21 | % Variance | |
| Gross Revenue (S$’mil) | $64.5m | $167.5m | > +100.0% |
| Property Operating Expenses (S$’mil) | $25.9m | $46.6m | +80.4% |
| Net Property Income (S$’mil) | $38.6m | $120.9m | > +100.0% |
| Distributable Income to Unitholders (S$’mil) | $30.1m | $103.6m | > +100.0% |
The superior set of results for the second half of the year (compared to the same time period last year) was due to the revenue contribution from properties post the completion of the remaining 63.11% stake in AsiaRetail Fund Limited on 27 October 2020 (you can read the news about the acquisition in full reported by The Business Times here, in case you’re not already aware.)
In case you’re wondering about the huge 80.4% jump in its property operating expenses, it is due to property operating expenses incurred by the new properties from AsiaRetail Fund Limited post-acquisition.
FY2019/20 vs. FY2020/21:
| FY2019/20 | FY2020/21 | % Variance | |
| Gross Revenue (S$’mil) | $164.4m | $341.2m | > +100.0% |
| Property Operating Expenses (S$’mil) | $53.5m | $94.6m | +76.8% |
| Net Property Income (S$’mil) | $110.9m | $246.6m | > +100.0% |
| Distributable Income to Unitholders (S$’mil) | $101.1m | $204.7m | > +100.0% |
As a result of the inclusion of revenue contribution from properties in AsiaRetail Fund Limited post-acquisition (the properties are Central Plaza, Hougang Mall, Tampines 1, Tiong Bahru Plaza, and White Sands), its gross revenue doubled when compared against the last financial year. However, the increase was partially offset by the loss of gross revenue from investment properties which were divested during the course of the current year under review.
Along with the inclusion of new properties into the REIT’s portfolio, its property operating expenses also climb 76.8%, with the increase being partially offset by the absence of property expenses from the investment properties that were divested during the year.
Portfolio Occupancy Profile (Q3 FY2020/21 vs. Q4 FY2020/21)
Moving on, let us take a look at the retail REIT’s portfolio occupancy profile – where I will be comparing the statistics recorded for the quarter ended 30 September 2021 (i.e. Q4 FY2020/21) against that recorded in the previous quarter ended 30 June 2021 (i.e. Q3 FY2020/21) to find out if it has continued to remain resilient:
| Q3 FY2020/21 | Q4 FY2020/21 | |
| Portfolio Occupancy (%) | 96.4% | 97.3% |
| WALE (by Net Lettable Area – years) | 1.6 years | 1.6 years |
| WALE (by Gross Rent – years) | 1.6 years | 1.6 years |
My Observations: Compared to the previous quarter, in my opinion, the REIT’s portfolio occupancy profile have continued to remain resilient – with its overall portfolio occupancy maintained at above 95.0%.
In terms of occupancy rates of individual malls, all of them saw improvements in terms of their occupancy rate except for Tampines 1 (which fell from 99.2% in Q3 FY2020/21 to 97.1% in Q4 FY2020/21), and White Sands (which fell from 96.3% in Q3 FY2020/21 to 95.4% in Q4 FY2020/21.)
The only slight negative as far as its portfolio occupancy is concerned, is its rental reversion – which fell to negative -0.6% for FY2020/21 (compared to positive +4.2% for FY2019/20.) However, that is very much in my expectations, considering the REITs are now prioritising on filling up vacant spaces in the malls (and in order to attract tenants, they will need to make their rates attractive enough, and in so doing affecting its rental reversion to a certain extent.)
Debt Profile (Q3 FY2020/21 vs. Q4 FY2020/21)
Similar to how I have reviewed the REIT’s portfolio occupancy profile in the previous section, in this section, I will be comparing its debt profile recorded for the current quarter under review (i.e. Q4 FY2020/21 ended 30 September 2021) against that recorded in the previous quarter (i.e. Q3 FY2020/21 ended 30 June 2021):
| Q3 FY2020/21 | Q4 FY2020/21 | |
| Aggregate Leverage (%) | 33.9% | 33.3% |
| Interest Coverage Ratio (times) | 5.2x | 5.1x |
| Average Term to Debt Maturity (years) | 2.8 years | 2.5 years |
| Average Cost of Debt (%) | 2.2% | 2.2% |
My Observations: In my personal opinion, the REIT’s debt profile continue to remain at healthy levels – particularly its aggregate leverage, at 33.3%, provides the REIT with plenty of debt headroom to make embark on even more yield-accretive acquisition activities before it reaches the regulatory limit of 50.0%.
In the coming financial year 2021/22 ahead, S$205.0m (or 11.3%) of the REIT’s total borrowings will be maturing, with another S$391.0m (or 21.5%) of its total borrowings maturing in FY2022/23.
Distribution Per Unit
For the second half of the financial year (period between 01 April and 30 September 2021), the REIT’s management have declared a distribution payout of 6.089 cents/unit – an improvement from 4.504 cents/unit declared from the same time period last year.
If you are a unitholder of the REIT, here are the payout dates you need to take note of:
Ex-Date: 03 November 2021
Record Date: 05 November 2021
Payout Date: 29 November 2021
Closing Thoughts
If you have read my review on CapitaLand Integrated Commercial Trust’s third quarter business update (you can check out the post here), you’ll notice that the only properties that continued to see its portfolio occupancy continuing to improve are those located in the heartlands (namely Tampines Mall, Bedok Mall, and Junction 8.) The same can be said for the occupancy rates for a huge majority of retail malls under Frasers Centrepoint Trust’s portfolio, where they are all located in heartland areas. This gives further proof that despite the headwinds posed by the ongoing Covid-19 pandemic, heartland malls have continued to stay strong.
Looking ahead, I’m confident of the REIT’s ability to continue to report a positive sets of results in the coming quarters ahead – barring another wave of Covid-19 outbreak resulting in further tightening of the current restrictions (in my opinion, that’s very unlikely to happen.) Also, its relatively healthy aggregate leverage gives the REIT plenty of headroom to make further yield-accretive acquisitions – which will not only boost its financial performance, and distribution payouts further.
With that, I have come to the end of my review on Frasers Centrepoint Trust’s latest results for the second half, as well as for the full-year of 2020/21 ended 30 September 2021. Last but not least, a gentle reminder that everything you’ve just read above are purely for educational purposes only. They do not represent any buy or sell recommendations for the REIT’s units. You’re strongly advised to 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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