Frasers Centrepoint Trust (FCT) 1Q2024: Resilient Performance

Frasers Centrepoint Trust (FCT) was the first to provide its business update among the Singapore REITs this quarter. FCT’s portfolio mainly comprises suburban retail malls in Singapore and is therefore considered a ‘defensive’ REIT. Let’s look into the FCT 1Q2024 result.

Stable Financial Performance

In the following table, we compare the FCT full-year results for 2022 and 2023:

FCT 1Q2024 business update revealed their financial performance for the whole year of 2023. The gross revenue climbed slightly from $356.9m in FY2022 to $369.7m in 2023, a climb of 3.6%. Net property income also climbed by 2.7% to $265.6m. The not-so-good news is that DPU fell slightly by 0.6% to $12.15m. Higher operating expenses and borrowing costs reduced the distribution per unit available to investors.

Overall, the fundamentals of the REIT still look good, with the revenue and income growing. The higher costs are inevitable due to the higher interest rate environment we are in at the moment.

Debt Profile

Let’s look into Frasers Centrepoint Trust FCT’s debt profile to assess whether the REIT is healthy enough to weather any pro-longed high-interest rate environment.

Overall, FCT’s debt profile is within our expectations. The aggregate leverage ratio is 37.2%, down from 39.3% in the previous quarter. This is a positive development as it demonstrates the manager’s prudence in capital management. The aggregate leverage of 37.2% is quite far from the regulatory limit of 50%.

Now, for the less pleasant news. The adjusted ICR declined to 3.35x, down slightly from 3.47x in 4Q2023. The average cost of debt also climbed to 4.3%. Although the borrowing cost has increased, this is not unexpected given the current interest rate environment, which will affect nearly all REITs that need to refinance their debt. The percentage of borrowings hedged to a fixed rate stayed steady at around 63%.

Overall, we believe the FCT’s debt profile remained healthy, and its debt position still allows it to maneuver as needed.

Debt Maturity Distribution

This is one of the main highlights of FCT’s debt profile. FCT no longer needs to refinance any debt for this year, which will alleviate any pressure on the REIT’s borrowing costs.

That said, for FY2025, we can see that a whopping 27% of debt needs to be refinanced. Should the interest rate stay high in 2025, we can expect FCT’s debt profile to continue to deteriorate further as it needs to refinance with higher borrowing costs.

Portfolio Occupancy

Here is the summary of FCT’s portfolio occupancy:

One of the main appeals of Frasers Centrepoint Trust is its strong portfolio occupancy. We continue to see such strong performance this 1Q2024 quarter, with the portfolio occupancy climbing to an impressive 99.9%. WALE for both GRI and NLA are also healthy at around 2%.

For the lease expiry, we can see from the chart above that around 20% will expire this year. Around 30% each will expire in 2025 and 2026. Generally, the lease expiry distribution is quite well-staggered.

Remarks

We are pleased that the REIT’s portfolio occupancy remained very strong, with the occupancy rate reaching 99.9%, indicating strong demand for its portfolio properties.

The debt profile remained resilient despite the higher costs associated with the higher interest rate environment. Its aggregate leverage ratio is at a relatively healthy level of 37.2%, and the REIT also does not have any refinancing obligation this year. Overall, the debt profile remains healthy, allowing it to maneuver to increase its shareholders’ value.

What do you think? For more information about Frasers Centrepoint Trust (FCT), please visit our FCT analysis page and our FCT dividend page.

For analysis of other REITs, you may check out our Singapore REITs’ data page.

Related page: 1Q2024 Presentation Slide

Stay up-to-date by following us: