Frasers Centrepoint Trust (SGX:J69U) is a pure-play Singapore REIT, where its portfolio comprises 9 retail malls (all located in heartland locations across the country), along with an office property.
Following the conclusion of REIT’s annual general meeting (AGM) last Tuesday (17 January) for the financial year ended 30 September 2022 (i.e. FY2021/22), it have made available its business update for the first quarter of the financial year 2022/23 ended 31 December 2022 shortly after market hours this evening (26 January 2023.)
As the REIT have switched to half-yearly reporting of its financial statements, for the current quarter under review, it only made available its portfolio occupancy and debt profile – both of which I will be looking at in this post, along with my thoughts.
Portfolio Occupancy Profile (Q4 FY2021/22 vs. Q1 FY2022/23)
When it comes to reviewing a REIT’s portfolio occupancy, I always review the statistics reported for the quarter under review against that reported in the previous quarter 3 months ago.
Hence, in this section, you’ll find my review of Frasers Centrepoint Trust’s portfolio occupancy profile for Q1 FY2022/23 ended 31 December 2022, compared against the previous quarter ended 30 September 2022 (i.e. Q4 FY2021/22) to find out if it has continued to remain strong:
|Q4 FY2021/22||Q1 FY2022/23|
|Portfolio WALE (by Net|
Lettable Area – Years)
|1.9 years||1.9 years|
|Portfolio WALE (by Gross|
Rental Income – Years)
|1.8 years||1.8 years|
My Observations: The only difference (compared to the previous quarter) is the 0.9 percentage point (pp) improvement in its portfolio occupancy – which can be attributed to improvements in occupancy rates in all but Causeway Point (which fell from 100.0% in Q4 FY2021/22 to 99.9% in Q1 FY2022/23), along with Northpoint City North Wing (including Yishun 10) which continues to be fully occupied in both quarters.
Additionally, all but one of its malls (Century Square, which have an occupancy rate of 88.7%, and lease negotiation for the space vacated by the cinema is still ongoing) are more than 90.0% occupied, which is good to note.
Debt Profile (Q4 FY2021/22 vs. Q1 FY2022/23)
Similar to how I have reviewed the REIT’s portfolio occupancy profile in the previous section, I will also be looking at its debt profile by comparing the statistics reported for the current quarter under review (i.e. Q1 FY2022/23) against that reported in the previous quarter (i.e. Q4 FY2021/22) to find out if it has continued to remain at a healthy level (this is especially important in the current rising interest rate environment):
|Q4 FY2021/22||Q1 FY2022/23|
|Average Term to|
Debt Maturity (years)
|2.0 years||1.8 years|
|Average Cost of|
|% of Borrowings Hedged|
to Fixed Rates (%)
My Observations: With interest rates on the rise, it’s not surprising to find the REIT’s debt profile have weakened when compared against that reported in the previous quarter.
Despite of that, in my opinion, its aggregate leverage, at 33.9%, continues to remain very healthy (and there remains plenty of debt headroom before the regulatory limit of 50.0% is reached.)
On the other hand, the REIT only has 73% of borrowings hedged to fixed rates, which is on the low side (in my opinion.) Additionally, as far as debt maturity is concerned, the REIT has a total of 46.3% (or S$863m) of borrowings due for refinancing from now till the end of the next financial year 2023/24 – as such, the REIT will likely be impacted by the rising interest rates when they refinance their borrowings, which will impact its distribution payout to unitholders.
Mixed set of results in my opinion – while its portfolio occupancy profile have continued to remain very stable (where all but one of its properties are at least 90.0% occupied), but its debt profile have weakened – more importantly, with just 73% of its borrowings hedged to fixed rates, coupled with the fact that more than 40% of its borrowings will due for refinancing from now till the end of the next financial year 2023/24, the REIT is very much exposed to the impacts of rising interest rates – where very likely the borrowings will be refinanced at higher interest rates. As a result, its financing costs will go up, and impacting its distribution payout to unitholders.
Finally, as the REIT’s management declares a distribution payout on a semi-annual basis (once when it releases its results for the first half of the financial year, and once when it releases its results for the second half of the financial year), there aren’t any distribution payouts declared for the current quarter under review.
With that, I have come to the end of my review of Frasers Centrepoint Trust’s Q1 FY2022/23 business update. As always, I do hope you’ve found the information presented above useful. Also, do take note that everything you’ve just read above is purely for educational purposes only. They do not represent any buy or sell calls for the REIT’s units. You’re strongly encouraged to do your own due diligence before you make any investment decisions.
Disclaimer: At the time of writing, I am a unitholder of Frasers Centrepoint Trust.
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