On 24 July 2024, Frasers Centrepoint Trust (“FCT”) have announced their third quarter business updates for FY2024. There were no disclosures relating to their DPU nor detailed breakdown of their financial performance. Noted however that their operations remain relatively stable with healthy tenants’ sales and shopper traffic. The Tampines 1 Asset Enhancement Initiative (“AEI”) is mentioned to be on track to complete with 100.0% committed occupancy. Investors will be able to assess their performance in the next quarter update where FCT will release their full year financial year results.
Website: General Announcement::Business Updates For The Third Quarter Ended 30 June 2024
Background
FCT is a leading developer-sponsored REIT and one of the largest suburban retail mall owners in Singapore. FCT’s property portfolio comprises nine retail malls and an office building located in the suburban regions of Singapore, near homes and within minutes to transportation amenities.
FCT is among the top-ten largest Singapore REITs (“S-REITs”) by market capitalization. It is also an index constituent of several benchmark indices including the FTSE EPRA/NAREIT Global Real Estate Index Series (Global Developed Index), FTSE ST Real Estate Investment Trust Index, MSCI Singapore Small Cap Index and the SGX iEdge S-REIT Leaders Index.
Listed on the Main Board of the Singapore Exchange Securities Trading Limited since 5 July 2006, FCT is managed by Frasers Centrepoint Asset Management Ltd., a real estate management company and a wholly owned subsidiary of Frasers Property Limited.
Key Metrics
Distribution Per Unit (“DPU”)
| Metrics | Current | Previous |
|---|---|---|
| Distribution Per Unit | No Info | -1.8% |
Based on the announcement on 24 July 2024, DPU was not included in the business update for the third quarter of 2024.
As of 31 March 2024, the metric was Unfavorable as DPU decreased by 1.8% to SGD0.0602 per share from SGD0.0613 per share for the same period in the previous financial year.
Occupancy
| Metrics | Current | Previous |
|---|---|---|
| Occupancy | 99.7% | 99.9% |
Occupancy rate as of 30 June 2024 decreased slightly to 99.7%, which remains extremely close to being 100% and fully utilized. This metric remains Favorable as it is above my expected healthy occupancy rate of 95%.
Gearing ratio
| Metrics | Current | Previous |
|---|---|---|
| Gearing Ratio | 39.1% | 38.5% |
The gearing ratio increased in leverage to 39.1% as of 30 June 2024. The metric remains Neutral.
Interest coverage
| Metrics | Current | Previous |
|---|---|---|
| Interest Coverage | 3.2x | 3.2x |
The adjusted interest coverage for the trailing 12 months remains relatively unchanged at 3.2 times. The metric remains Favorable as it is above my preference of 3.0 times. They have a margin of safety should interest rates increase,
Debt maturity profile
| Metrics | Current | Previous |
|---|---|---|
| Debt Maturity Profile | 2.8 years | 3.0 years |
Weighted average term to maturity of their debt shortened to 2.8 years as of 30 June 2024. This is Favorable as while they have sufficient time to refinance their debts as they fall due.
Price to Book Ratio
| Metrics | Current | Previous |
|---|---|---|
| Price to Book Ratio | 0.98 | 0.96 |
Based on the announcement on 24 July 2024, net asset value (“NAV”) was not included in the business update for the third quarter of 2024.
The Price to Book (“P/B”) ratio currently remains unchanged at 0.98. This is computed using the closing share price of SGD2.22 on 30 July 2024 and the net asset value per share of SGD2.26 as of 31 March 2024. The P/B ratio is Favorable.
Other Metrics
Tenant profile
FCT has a well-diversified tenant profile with the top 10 customers as of 30 June 2024 account for about 20.9% of monthly portfolio gross rental income. Furthermore, no single tenant accounts for more than 6.2% of FCT’s gross rental income. This is Favorable as FCT will not be too reliant on any single tenant for income.
Heartland Living
The Singapore government intend for every town to have a shopping mall available and successful. Such that they are willing to have measures to help support heartland businesses financially. This means that as an investor of retail properties, you can be assured that there will almost always be tenants for your shopping malls, which translates to rental income. It may still be subjected to capital depreciation and appreciation when exposed to economic conditions, such as the current high interest rates. However as of now, your interests are in line with the government.
Website: The Bull Case For Investing In Singapore Retail Property
Dividend
| Year | Yield | Total |
|---|---|---|
| 2024 | 2.71% | SGD 0.060 |
| 2023 | 5.47% | SGD 0.122 |
| 2022 | 5.51% | SGD 0.122 |
| 2021 | 5.38% | SGD 0.092 |
| 2020 | 4.13% | SGD 0.122 |
| 2019 | 6.29% | SGD 0.140 |
The total payout for the first half of 2024 amounted to SGD0.060 per share. When annualized, the expected dividend payout will be approximately SGD0.120 per share for 2024.
With a closing share price of SGD2.22 on 30 July 2024, this translates to a dividend yield of 5.41%. For my benchmark, a general reasonable range would be around 5.75%. The dividend yield is thus Neutral. This is something investors should keep an eye out on, especially with the dilution in the first half of FY2024.
Website: Reasonable Dividend Yield 2024Q3 – 5.75%
If using dividend yield of 5.75% as a benchmark, based on the dividend of SGD0.120 there is potential for FCT to see its share price drop by another 6.0% to SGD2.09. Investors will need to be mentally prepared that the share price may fall further should the interest rates and yield of safe assets increase.
| Yield | Share Price | Downside |
|---|---|---|
| Current (5.41%) | 2.22 | – |
| 5.75% | 2.09 | -6.0% |
| 6.75% | 1.78 | -19.9% |
| 7.75% | 1.55 | -30.3% |
| 8.75% | 1.37 | -38.2% |
Interest Rate Sensitivity
The economic data has shown stability over the last few months. This gives the Federal Reserve more incentive to lower interest rate after increasing the interest rates to a range between 5.25% and 5.50% on 26 July 2023.
Website: Fed seen holding rates steady in July, start cuts in Sept
Below is the information for FCT as of 30 June 2024:
| Description | Amount (SGD’000) |
|---|---|
| Total Debt | $2,083,300 |
| Debt Not Hedged (%) | 32.8% |
| Debt at Floating Rate Exposed | $683,322 |
| Distributable Income FY2023 | $207,135 |
I have performed the interest rate sensitivity analysis as below:
| Change in Interest Rates | Decrease in Distributable Income (SGD’000) | Change as % of FY2023 Distribution |
|---|---|---|
| + 50 bps | -$3,417 | -1.6% |
| + 100 bps | -$6,833 | -3.3% |
| + 150 bps | -$10,250 | -4.9% |
| + 200 bps | -$13,666 | -6.6% |
| + 250 bps | -$17,083 | -8.2% |
| + 300 bps | -$20,500 | -9.9% |
Do note the above is my estimation which may be different from management’s estimation. Nonetheless, if the interest rates were to increase by the basis points above, FCT may experience a fall in DPU accordingly.
Summary
| Metrics | Financials | Rating |
|---|---|---|
| Distribution Per Unit | No Info | Unfavorable |
| Occupancy | 99.7% | Favorable |
| Gearing Ratio | 39.1% | Neutral |
| Interest Coverage | 3.2x | Favorable |
| Debt Maturity Profile | 2.8 years | Favorable |
| Price to Book Ratio | 0.98 | Favorable |
| Overall | Favorable |
Overall, the metrics indicate that it remains Favorable to invest in FCT this quarter, giving assurance for investors until the next update for their full financial year.
Disclaimer: Not financial advice. All data and information provided on this site is for informational purposes only.
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