Frasers Centrepoint Trust Analysis @ 9 November 2020

Basic Profile & Key Statistics

Frasers Centrepoint Trust (FCT) is a Retail REIT that invests mainly in Retail malls in Singapore. FCT has completed its acquisition of ARF and divestment of Bedok Point, which currently owns 12 properties in Singapore. 

Performance Review

Gross revenue and NPI decreased YoY by 33.8% and 42.8% mainly due to rental relief. Income available for distribution decreased by 51.6%, DPU drop would be drop without the release of retention from the previous 1H period.

Full-year FY20 rental reversion is at 4.2%, which dropped slightly as compared to 1H FY20 at 5.2%. 

Although shopper traffic only recovered to around 60% between July to September, tenant sales have remained strong at around 95% as compared to the previous year.

Lease Profile

Occupancy is healthy at 94.9%. WALE is short at 1.51 years with the highest lease expiry of 33.6% falls in FY2022. Weighted average land lease expiry is slightly long at 70.49 years, this figure would be updated upon the release of the FY20 annual report.

Debt Profile

Gearin ratio is healthy at 35.9%. Cost of debt is low at 2.4% with a moderate level of unsecured debt at 78.5%. Fixed rate debt % is low at 54.3%. Interest cover ratio is high at 4.95 times. WADE is short at 2.1 years where the highest debt maturity of 31.2% falls in FY23.

Diversification Profile

Top geographical contribution and top property contribution are high at 98.1% and 35% respectively. Top tenant and top 10 tenants contributions are low at 3.3% and 22.3%. FCT holds 31.15% of the units in Hektar Real Estate Investment Trust which is a retail-focused REIT in Malaysia. This explains the small % from Malaysia.

Key Financial Metrics

Property yield is low at 4.6%. Management fee is not competitive in which unitholders receive S$ 5.49 distribution for every dollar paid to the manager. Distribution on capital is slightly low at 2.9%. Distribution margin is moderate at 48.4%. 

Trends

Uptrend - NAV per Unit

Downtrend - DPU, Interest Cover Ratio, Property Yield, Distribution Margin

Relative Valuation

i) Average Dividend Yield  - Average yield at 5.24%,  apply the annualized past 4 quarters DPU of 9.042 cents will get S$ 1.73. 

ii) Average Price/NAV - Average value at 1.09, apply the latest NAV of S$ 2.267 will get S$ 2.47.

Author's Opinion

Favorable	Less Favorable
Low Cost of Debt	Short WALE
High Interest Cover Ratio	Short WADE
LowTop Tenant & Top 10 Tenants Contribution	High Top Geographical Contribution
NAV Uptrend	High Top Property Contribution
	Low Property Yield
	DPU Downtrend
	Interest Cover Ratio Downtrend
	Property Yield Downtrend
	Distribution Margin Downtrend

FCT performance has been affected by COVID-19 but a strong recovery for the tenants' sales is seen starting from July. With the upcoming phase 3 opening, FCT performance is expected to see improvement. FCT has just completed its acquisition of ARF on 27 Oct and divestment of Bedok Point on 9 Nov. 

As per the above Pro Forma DPU from the proposed acquisition presentation, the DPU is accretive with both FY2019 and 9M2020 scenario. As such, moving forward, FCT performance is expected to be improved.

For more information, you could refer to:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview of Singapore REIT

REIT Analysis - List of previous REIT analysis posts

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REIT Investing Community - Facebook Group where members share and discuss REIT topic

*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions as well as loss, or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.