Frasers Centrepoint Trust (SGX: J69U), or FCT for short, invests in retail properties scattered across the various suburban areas in Singapore. It is also one of the few Singapore-listed REITs that has all of its properties located in the city state (so, for those of you who prefer to invest in REITs that have all of its properties located in Singapore, the REIT is one you can consider).

I consider the REIT a "defensive" one in that, a majority of its retail mall tenants operate in essential sectors such as food and beverage, supermarkets, pharmaceuticals, and enrichment classes that cater to the needs of nearby residents. Regardless of economic conditions, these tenants are likely to see consistent patronage as they provide for the community's everyday necessities.

As of 30 September 2024, FCT's portfolio comprises 9 retail malls (NEX and Waterway Point, to which FCT has a 50.0% interest, Causeway Point, Tampines 1, Northpoint City North Wing, Tiong Bahru Plaza, Century Square, Hougang Mall, and White Sands), as well as one office property (Central Plaza), valued at S$7.1 billion.

This morning (25 October 2024), FCT made available its results for the 2nd half, as well as for the full year ended 30 September 2024 (i.e., FY2023/24), and in this post, you will find my review of the suburban retail mall REIT's financial performance, portfolio occupancy and debt profile, and its distribution payout to unitholders.

Let's begin:

Financial Performance (2H FY2022/23 vs. 2H FY2023/24, and FY2022/23 vs. FY2023/24)

In this section, you will find my review of FCT's financial performance for the 2nd half of the financial year, followed by its performance for the full year:

2H FY2022/23 vs. 2H FY2023/24:

My Observations: FCT's financial results for the 2nd half of FY2023/24 was a slightly weaker one compared to the same time period last year.

Gross revenue was down by 2.5% year on year to S$179.5 million mainly due to the absence of contribution from Changi City Point which was divested on 31 October 2023, and lower contribution from Tampines 1 during its asset enhancement works – if these 2 were excluded, FCT’s gross revenue would have been up by 4.1%, contributed by higher physical occupancy, passing rents, and staggered rental across most malls.

Property operating expenses also fell by 6.9% year on year to S$50.7 million, mainly due to the divestment of Changi City Point. Stripping this out, property operating expenses would have increased by 2.6% due to higher utilities expenses, higher property tax, higher net allowance for doubtful receivables, and partially offset by lower maintenance expenses.

As a result of a higher percentage decline in property operating expenses, compared to the dip in gross revenue, FCT's net property income inched down by just 0.6% year on year to S$128.8 million. However, if Changi City Point and Tampines 1 were excluded, the REIT's net property income would have been up by 4.7%.

Distributable income to unitholders was up by 6.2% year on year to S$109.4 million due to a 34.5% jump in distributions from investments (which relates to the REIT's investment in GRPL, SST, NEX Partners Trust, Changi City Carpark Operations LLP, and Hektar REIT).

FY2022/23 vs. FY2023/24:

My Observations: Similar to its results for the 2nd half of FY2023/24, its full year results was also largely weaker – with its gross revenue and net property income falling by a mid-single digit percentage, which can be attributed to the divestment of Changi City Point on 31 October 2023, as well as disruptions to income contribution from Tampines 1 due to asset enhancement works.

However, if these 2 properties are excluded, then FCT's gross revenue and net property income would have went up by 3.5% and 3.4% on a year on year basis respectively.

Distributable income to unitholders increased by 3.2% year on year to S$214.3 million due to a 29.3% jump in distributions from investments (which relates to the REIT's investment in GRPL, SST, NEX Partners Trust, Changi City Carpark Operations LLP, as well as Hektar REIT, along with a distribution of S$3.8 million from NEX Partners Trust after it became a subsidiary of the Group in 1H FY2023/24).

Portfolio Occupancy Profile (Q3 FY2023/24 vs. Q4 FY2023/24)

Next, let us have a look at FCT's portfolio occupancy profile, where I will be comparing the statistics reported for the 4th quarter of FY2023/24 (ended 30 September 2024) against that reported in the previous quarter 3 months ago (i.e., the 3rd quarter of FY2023/24 ended 30 June 2024) to find out if it has continued to remain at a resilient level just like in the previous quarters (where its portfolio occupancy has been above 95%, with lease expiries well-spread out):

My Observations: FCT's portfolio occupancy profile remains largely unchanged from the previous quarter – with all of its properties (including Central Plaza) having an occupancy rate of at least 98.3% – which is very high in my opinion.

Also, for FY2023/24, a rental reversion of +7.7% was achieved for new and/or renewed leases for its retail portfolio, a further improvement from the rental reversion of +4.7% last year. all of its properties recorded a positive rental reversion of between +4.0% and +8.8% – which is another positive for the REIT.

Debt Profile (Q3 FY2023/24 vs. Q4 FY2023/24)

No doubt the US Federal Reserve has made its first interest rate cut in September (by 0.50%), and signalled for further cuts from now till end-2026 to bring benchmark borrowing rates down to a range of 2.75% to 3.00% by then, but at this point in time, interest rates still remain at a high, and hence I'll want to make sure the REIT continues to maintain its debt profile at a healthy level.

In the table below, you will find a comparison of FCT's debt profile recorded for the 4th quarter of FY2023/24 ended 30 June against that reported in the previous quarter 3 months ago (just like how I did a comparison of the REIT's portfolio occupancy profile in the previous section):

My Observations: Compared to the previous quarter 3 months ago, FCT's debt profile has largely improved – particularly in its aggregate leverage (which fell by 0.6pp to 38.5% – a healthy level), interest coverage (which improved slightly to 3.4x), average cost of debt (which was down by 0.1pp to 4.1%), as well as its percentage of borrowings hedged to fixed rates (which was up by 4.2pp to 71.4%).

Looking at its debt maturity profile ahead, between FY2024/25 and FY2027/28 (a period of 4 financial years), it has an average of 18.1% of borrowings due for refinancing each year – which is well-spread out. It has 43.2% of borrowings due for refinancing only in FY2028/29 or later.

Distribution Payout to Unitholders

The management of FCT declares a distribution payout to its unitholders on a semi-annual basis.

For the 2nd half of FY2023/24, a distribution payout of 6.02 cents/unit was declared, which is the same as its payout a year ago.

Together with its payout of advanced distribution payout of 4.25 cents/unit on 02 April 2024 (for the period between 01 October 2023 and 04 February 2024 following the private placement to fund for the acquisition of Nex), and 1.772 cents/unit paid out on 30 May 2024 (for the period between 05 February and 31 March 2024), FCT's distribution payout for the full year amounted to 12.042 cents/unit. Again, if you compare it against the full year payout of 12.150 cents/unit declared a year ago, it is slight 0.9% decline.

If you are a unitholder of FCT, do take note of the following dates regarding its distribution payout:

Ex-Date: 04 November 2024
Record Date: 05 November 2024
Payout Date: 29 November 2024

CEO Mr Richard Ng's Comments & Outlook (from the REIT's Press Release)

"We are pleased that FCT has delivered a healthy set of results for FY24, backed by stable financial position and robust operating performance. FY24 was an eventful year marked by several key achievements which strengthened FCT's portfolio and future performance. In March 2024, we completed the acquisition of an additional 24.5% interest in NEX, increasing FCT's stake in the mall to 50.0%. This acquisition further diversified and fortified FCT's retail portfolio. Another key achievement was the completion of the asset enhancement initiative ("AEI") at Tampines 1 in August 2024. The AEI was completed on schedule and with return on investment exceeding our target of 8%. Finally, the inclusion of FCT as a constituent of the Straits Times Index in March 2024 marked a significant milestone and stood as a testament to FCT's progressive growth journey over the years.

Looking ahead, we anticipate another exciting year in FY25, as we embark on the AEI at Hougang Mall and maintain our focus on the asset and property management of FCT's portfolio. We remain optimistic about the outlook of the suburban retail sector in Singapore and believe that FCT is well-positioned to deliver stable growth and healthy performance in the future."

Closing Thoughts

On the whole, it was a decent set of results reported by FCT – the only slight negative was in its financial results, due to the absence of income from Changi City Point following its divestment completed in 31 October 2023, as well as disruption in income from Tampines 1 which was undergoing asset enhancement works.

Portfolio occupancy continue to remain at a very high level, with a positive rental reversion reported for its retail and office properties for FY2024 – by +7.7% and +9.3% respectively. Also, the occupancy rate of all of its properties are at least 90%.

Finally, its debt profile is a very healthy one – with its aggregate leverage at 38.5% a very good debt headroom from the regulatory limit of 50.0%. Debt maturity is also very well-spread out over the years.

All things considered, as a unitholder of the REIT, I am happy with the suburban retail REIT's latest set of 'report card' for its largely stable set of figures.

With that, I have come to the end of my review of FCT's financial results for the 2nd half, as well as for the full-year ended 30 September 2024. I hope you have found the contents presented in this post useful. However, do note that all the opinions expressed above are purely mine which I am sharing for educational purposes only. They do not imply any buy or sell calls for the REIT's units. You are strongly encouraged to do your own due diligence before you make any investment decisions.

Related Documents

• Press Release
• Financial Statement
• Presentation Slides

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

The post My Review of Frasers Centrepoint Trust's 2H and Full-Year Results for FY2023/24 first appeared on The Singaporean Investor.