Following the end of the financial year 2021/22 on 30 September, Frasers Centrepoint Trust (SGX:J69U) published its annual report early this morning, along with details about its upcoming annual general meeting (AGM.)

For those who are unfamiliar with the REIT, it is one of the largest suburban retail mall owners in Singapore, with assets under management of approximately S$6.2bn. Its portfolio comprises of 9 retail properties (in Causeway Point, Northpoint City North Wing [including Yishun 10 Retail Podium], Changi City Point, Waterway Point [40.0% interest], Tiong Bahru Plaza, White Sands, Hougang Mall, Century Square, and Tampines 1), along with 1 office property (in Central Plaza.) On top of that, they also have a 30.53% stake in Hektar Real Estate Investment Trust, a retail-focused REIT in Malaysia listed on the Main Market of Bursa Malaysia Securities Bread (its portfolio comprises Subang Parade [Selangor], Mahkota Parade [Melaka], Wetex Parade [Johor], Central Square [Kedah], Kulim Central [Kedah], and Segamat Central [Johor].)

In this post, you’ll find a summary of the REIT’s latest annual report to take note of, along with details about its upcoming AGM.

Let’s begin:

Summary of Frasers Centrepoint Trust’s Annual Report

Performance Highlights:

  • Gross revenue and net property income were up by 4.6% and 4.9% year-on-year (y-o-y) to S$356.9m (FY2020/21: S$341.1m) and S$258.6m (FY2020/21: S$246.6m) respectively, with improvements led by the full year contribution from the enlarged portfolio following the ARF Acquisition on 27 October 2020, and the absence of rental rebates given to tenants in FY2020/21, on top of an increase in atrium income with the lifting of restrictions on atrium events in late-March 2022. However, this was offset by loss of contributions from the divested properties – Bedok Point, Anchorpoint, and YewTee Point, where all 3 were divested in FY2020/21, along with higher property operating expenses (due to the full-year contribution from the enlarged retail portfolio, higher marketing expenses, and more ad-hoc maintenance works carried out, offset by absence of property expenses from the 3 divested properties.)
  • Distribution per unit (or DPU) inched up by 1.2% y-o-y to 12.227 cents/unit (FY2020/21: 12.085 cents/unit), with the increase attributed to higher net property income and distribution from joint ventures, offset by higher finance costs arising from the higher interest rate environment.
  • Aggregate leverage, as at 30 September 2022, was at a healthy level of 33.0% (which is lower than the average aggregate leverage of 36.9% in the S-REITs industry), with 70.5% of the REIT’s total borrowings on fixed interest rates, and cost of debt at 2.5%. In terms of debt maturity profile, 21.5% of its borrowings will be maturing within the next 1 year, 26.0% in the next 1 to 2 years, 28.2% in the next 2 to 3 years, and the remaining 24.3% in the next 3 years and beyond.
  • Portfolio occupancy was at 97.5% as at 30 September 2022, up 0.2%-point y-o-y – with the larger malls in Causeway Point and Northpoint City North Wing registering 100.0% occupancy; Tampines 1 and Causeway Point registered the largest y-o-y improvement in occupancy of 2.0pp (percentage points) and 1.4pp respectively.
  • Rental reversion was at +1.5% (based on the variance between the rent in the first year of the income lease and the rent in the final year of the outgoing lease), compared with the previous year’s -0.6%. If based on the variance between the average rent of the income lease and the average rent of the outgoing lease, then rental reversion was +4.2%. All malls except for Changi City Point (where its recovery was diluted by hybrid work arrangements and slow resumption of large-scale exposition events) and Century Square (due to dampened occupancy with the pre-termination of an anchor tenant) recorded positive rental reversions between +1.2% and +2.6%.
  • Retail portfolio’s total tenants’ sales in FY2021/22 improved by 11.3% to S$2,313.9m (FY2020/21: S$2,078.3m), with brick-and-mortar retail and restaurants displaying its resilience and recording a recovery trajectory as safe management measures were gradually relaxed.
  • Top 10 tenants collectively accounted for 18.4% (FY2020/21: 19.5%) of the REIT’s total gross rental income, with its largest tenant being NTUC FairPrice and Unity Pharmacy accounting for 4.1% (FY2020/21: 3.3%) of the portfolio gross rental income.

Letter to Unitholders:

  • The financial year under review was a “Year of Recovery” (where Singapore transited to living with Covid), but new challenges continued to emerge – including the war between Ukraine and Russia, wild swings in energy and commodity prices, aggressive hikes by the US Federal Reserve, rising geopolitical and trade tensions, and persistent inflation – all of which casting a long shadow over the recovery of businesses and an economy still reeling from the Covid-19 pandemic.
  • However, the REIT’s Manager have identified several opportunities that can help to cushion the impact, including rent growth and higher ancillary income. Other opportunities include asset enhancement initiatives (AEI) for value creation, along with higher contributions from the acquisition of the additional 10.0% stake in Waterway Point to be completed in the coming financial year 2022/23. The Manager will stay vigilant on cost movements such as energy prices and contracted service fees, and will adopt appropriate hedging strategies to manage the risks.
  • On the sustainability-front, the Manager works closely with the REIT’s Sponsor, Frasers Property Limited, towards the Group’s goal to net-zero carbon by 2050 – some of the highlights include the REIT achieving a 5-Star rating in the 2022 GRESB Real Estate Assessment for the 2nd year running, along with receiving an ‘A’ rating from the MSCI ESG Ratings in May 2022, improving to its previous ‘BBB’ rating, for advancing in its management of financially relevant ESG risks and opportunities.
  • Looking ahead, the Manager remains focused on the financial and operational performance of the REIT’s portfolio to optimise returns to the Trust and its unitholders. It will continue to look at AEI of its properties for value creation and acquisition opportunities (in the Sponsor’s pipeline, this includes Northpoint City South Wing, which is owned by Frasers Property and the TCC Group.)

Details of Frasers Centrepoint Trust’s Upcoming AGM

The REIT will be holding its AGM on Tuesday, 17 January 2023, at 10.00am at InterContinental Singapore (Grand Ballroom at Level 2.) There will be no option for unitholders to attend virtually.

As far as attending the meeting is concerned, if your unitholdings are in your CDP account, you just need to present your NRIC on the day itself for verification; however, if your unitholdings are held in a custodian account, you will need to inform your brokerage your interest to attend and they will appoint you as a proxy to do so – I have just confirmed this with the REIT’s investors’ relation.

Finally, if you have any questions for the management, you can either raise them in-person during the meeting, or via email to ir@fraserscentrepointtrust.com by Friday, 06 January 2023, at 10.00am – along with submitting your questions, you will also need to identify yourself by providing your full name, address, and also the manner in which you hold on to the units of the REIT (e.g. via CDP, CPF or SRS.)

As a unitholder of the REIT, I will be attending the upcoming meeting in-person. For those who are also attending the meeting and like to meet up, you can let me know via the comments below, or letting me know here.

Closing Thoughts

With the relaxation of most of the safe management measures, the improvements in tenant sales, and also its financial performance was very much within my expectation.

While its debt maturity is well-spread out over the next couple of years, but with just 70.5% of its total borrowings on fixed rates (which is a little on the low side in my opinion), and about 47.5% of total borrowings requiring refinancing within the next 2 years, coupled with the fact that interest rates are on an upward climb, it is inevitable that the REIT’s bottomline, and distribution payout to unitholders in the near-term will be impacted by higher financing costs to a certain extent. I will continue to keep a close watch on this in the REIT’s coming quarterly updates.

This comes to the end of my summary and review of the REIT’s latest annual report. As always, I do hope you’ve found the contents within useful. Do note that this post is by no means a buy or sell recommendation for units of the REIT. You should ways 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.

The 8th Edition of REITs Asia Pacific 2023: A half-day event on 16 March 2023 (Thursday) from 2.00pm - 5.00pm at Carlton Hotel Singapore. Panel discussions in this year's event will include (i) will Asian Logistics/Industrial REITs will continue to outperform in 2023; (ii) can Asia's REIT market thrive amid high rising inflation and higher interest rates; (iii) is this the best time to invest in technology in the REITs market; (iv) importance of ESG to the REITs market. Some of the participating S-REITs include BHG Retail REIT, Cromwell European REIT, IREIT Global, Lendlease Global Commercial REIT. To find out more about the event, and how you can attend, you can visit the organiser's (The Pinnacle Group International) website here...

The 8th Edition of REITs Asia Pacific 2023 - 16 March (2.00 to 5.00pm SGT)