5 Key Takeaways From Frasers Centrepoint Trust’s H1 2022 Earnings

Singapore REITs shopping buy

Tim Phillips

May 9, 2022

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While long-term investors have been feeling the pain in stock markets recently, it’s always good to know that dividend stocks can provide some sort of “buffer” for portfolios – in the form of passive income.

A lot of real estate investment trusts (REITs) have been reporting their results. I’ve covered many of Singapore’s industrial REITs and their earnings but retail REITs also provide a great way to earn dividend income.

One of the biggest retail REITs, and one that’s almost 100% focused on Singapore, is Frasers Centrepoint Trust (SGX: J69U).

The REIT recently released its first-half fiscal year (FY) 2022 (for the six months ending 31 March 2022). Here are five key takeaways for investors from Frasers Centrepoint Trust’s most recent numbers.

1. Revenue and net property income rise

For Fraser Centrepoint Trust’s H1 2022 period, gross revenue rose 1.5% year-on-year to S$176.2 million, up 1.5% year-on-year.

On the net property income (NPI) side, the figure for the period was S$130.5 million. That was up 3.8% year-on-year from H1 2021.

Growth of the respective numbers were mainly attributed to the REIT’s full six-month contribution from its AsiaRetail Fund (ARF) acquisition.

This was completed in late 2020 and saw the REIT acquire the remaining 63.1% stake of ARF, which gave it full ownership of properties such as Tampines 1, Tiong Bahru Plaza, Century Square, Hougang Mall, White Sands, and Central Plaza.

Some of these gains were offset by the loss of contribution of divested properties in the previous year.

2. DPU rises 2.3% on the year

Frasers Centrepoint Trust announced a distribution per unit (DPU) of 6.136 Singapore cents for the first half FY 2022.

This was a 2.3% year-on-year increase from the 5.996 Singapore cents DPU that was declared in the year-ago period.

It also showed growth of 0.8% half-on-half from the H2 2021 DPU of 6.089 Singapore cents. The higher DPU was achieved from higher income generated during the period as income available for distribution to unitholders climbed 8.0% year-on-year to S$109.2 million.

3. Financial flexibility

Frasers Centrepoint Trust continues to possess a solid financial profile, which hans’t really much changed in its latest half-year earnings.

Its gearing ratio actually improved during the most recent three-month period and it ended the first calendar quarter with a gearing ratio of just 33.3%, versus the 34.5% at the end of 2021 (see below).

Meanwhile, its debt maturity profile is robust, with its maturities well spread out over the next five to six years, with only 8.3% of its S$1.82 billion in debt coming due in FY2022.

FCT debt profile H1 2022

Source: Frasers Centrepoint Trust H1 FY2022 earnings presentation

4. Portfolio occupancy improves to 97.8%

Given the return of the consumer that wants to shop, and the opening up of the Singapore economy, it was unsurprising to see that the REIT’s occupancy rate improved from the end of 2021.

During the most recent three-month period, Frasers Centrepoint Trust’s retail portfolio saw its occupancy rate improve to 97.8% (as of 31 March 2022) from 97.2% at the end of 2021.

All its Singapore retail properties saw either stable or improved occupancy rates, with Century Square seeing the best performance with a 2.3 percentage point rise in occupancy to 93.4% during the latest three-month period.

With higher occupancy, this helped the REIT’s retail portfolio record an improved NPI margin – which rose 1.2 percentage points year-on-year to 74.9%.

5. Rental reversions remain robust

Finally, Frasers Centrepoint Trust is continuously looking to refresh its tenant space and offer up relevant offerings to consumers.

The renewal of leases will be one of the key drivers of value for the REIT going forward as year-to-date rental reversion has been positive at 1.73% for incoming vs. outgoing tenants.

Management did also note that year-to-date sales of its tenants have outperformed the respective pre-Covid and 2021 periods.

The removal of mandatory work-from-home orders, and the return to the office, is clearly helping the REIT’s tenants attract shopper back into the malls.

Benefitting from sense of normalcy

Frasers Centrepoint Trust posted a solid H1 2022 earnings report with improving occupancy and rental reversion rates.

For investors who are focused on generating dividend income, there was a lot to like from its latest numbers.

Financially, the REIT also remains sound and suburban rental rates are buoyant, up both on a year-on-year and quarter-on-quarter basis.

Based on the REIT’s latest unit price of S$2.34, its shares are offering dividend investors a 12-month forward dividend yield of 5.2%.

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

About the Author: Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth. He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer. In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.