Key Highlights from Frasers Centrepoint Trust and Mapletree Logistics Trust’s Earnings Updates

January 26, 2024

In this analysis, we examine the earnings updates and strategic advancements of Frasers Centrepoint Trust (SGX: J69U), commonly referred to as FCT, and Mapletree Logistics Trust (SGX: M44U), known as MLT.

Both trusts have exhibited remarkable resilience and strategic acumen, successfully navigating through the dynamic market conditions, as evidenced by their recent financial and operational performances.

Here are some of the key highlights from the earnings updates:

Frasers Centrepoint Trust (FCT)

  1. Strong Retail Occupancy Rates:

FCT has reported a remarkable 99.9% retail committed occupancy rate for the first quarter of FY2024, a notable increase from previous periods. This figure excludes Tampines 1, which is currently undergoing asset enhancement initiatives (AEIs). Tampines 1 itself has secured a 97% leasing commitment for its AEI spaces, indicating robust demand.

  1. Shopper Engagement and Tenant Performance:

The year-over-year increase in shopper traffic by 3.1% is a positive indicator. However, tenant sales dipped slightly by 0.7% year-over-year (yoy). Adjusting for tenants under renovation, sales would have seen a 1.1% increase.

  1. Efficient Capital Management:

FCT reduced its gearing to 37.2% as of December 31, 2023. However, the average cost of debt increased to 4.3%, and the interest coverage ratio adjusted to 3.35x.

  1. Expansion through Strategic Acquisition:

FCT’s acquisition of an additional 24.5% interest in Nex for S$523.1 million signals its commitment to diversifying its income streams. The total effective interest in Nex now stands at 50%, following an earlier acquisition of a 25.5% stake. The financing of this acquisition is planned through a mix of private placement and debt financing.

  1. Future Outlook:

FCT’s strategic focus remains on bolstering its position in Singapore’s prime suburban retail market. The Nex acquisition is expected to enhance distribution per unit (DPU) and align with FCT’s commitment to delivering stable distributions to its unitholders.

Mapletree Logistics Trust (MLT)

  1. Consistent DPU Growth:

MLT’s DPU for Q3 FY2024 grew by 1.2% yoy to 2.253 cents. The total distributable amount to unitholders increased by 4.8% to S$112.2 million, partly due to a divestment gain of S$12.4 million.

  1. Solid Growth in Revenue and NPI:

MLT reported a 2.1% yoy increase in gross revenue to S$184.0 million in Q3 FY2024. NPI rose by 1.5% to S$159.5 million, fueled by contributions from properties in Singapore, Japan, South Korea, and Australia.

  1. Currency Impact and Mitigation Strategies:

The strong Singapore Dollar impacted growth, with revenue and NPI growth on a constant currency basis standing at 4.8% and 4.1%, respectively. MLT mitigates currency risks through foreign currency forward contracts.

  1. Mixed Performance in 9MFY2024:

While gross revenue slightly increased to S$552.9 million, NPI saw a marginal decrease of 0.2% to S$479.6 million. The distributable amount to unitholders, including divestment gains, rose by 4.0%.

  1. Portfolio and Rental Trends:

Portfolio occupancy slightly decreased to 95.9% with a positive rental reversion of +3.8%. Excluding China, rental reversions averaged +6.2%.

  1. Challenges in the Chinese Market:

MLT is currently facing negative rental reversions in China, a trend expected to continue over the next 6-12 months.

  1. Prudent Financial Management:

MLT maintained a stable gearing at 38.8% and a healthy adjusted interest coverage ratio of 3.2x. The trust continues to pursue an asset recycling strategy, including acquisitions in India and divestments in Malaysia.

FCT and MLT remain resilient, but rising cost of debt is a concern

FCT and MLT have consistently shown strong strategic planning and operational efficiency within their respective sectors, underlining their resilience in the face of economic challenges.

Their concentrated efforts in capital management, asset enhancement, and market diversification play a crucial role in steering through the current economic landscape.

However, it is important to note the impact of the rising cost of debt, exacerbated by the recent sharp increase in interest rates, on their profit margins.

Although the market anticipates a potential gradual reduction in interest rates this year, the lingering effects on earnings remain a point of concern.

Investors are advised to exercise caution and conduct thorough research before making investment decisions, especially considering these fluctuating market conditions and their potential impact on REITs like FCT and MLT.

Disclaimer: ProsperUs Head of Content & Investment Lead Billy Toh doesn’t own shares of any companies mentioned.

Billy Toh

Billy is deeply committed to making investment accessible and understandable to everyone, a principle that drives his engagement with the capital markets and his long-term investment strategies. He is currently the Head of Content & Investment Lead for Prosperus and a SGX Academy Trainer. His extensive experience spans roles as an economist at RHB Investment Bank, focusing on the Thailand and Philippines markets, and as a financial journalist at The Edge Malaysia. Additionally, his background includes valuable time spent in an asset management firm. Outside of finance, Billy enjoys meaningful conversations over coffee, keeps fit as a fitness enthusiast, and has a keen interest in technology.

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