Frasers Commercial Trust Declares Stable DPU of 2.40 cents for 4QFY18

Frasers Commercial Trust has announced their 4QFY18 financial results on Friday, 19th October 2018. As mentioned in my previous post (My Personal Analysis of Frasers Commercial Trust), Frasers Commercial Trust has managed to pay out 2.40 cents for 1QFY18, 2QFY18 and 3QFY18 respectively. If they payout 2.40 cents for 4QFY18, this will amount to a total of 9.6 cents in FY18 versus 9.82 cents in FY17 which is a merely 2.24% drop in annual DPU. Yes, as per predicted, they have declared a distribution per unit of 2.40 cents for 4QFY18.

Debt

The proceeds from the divestment of 55 Market Street were utilised to repay S$197 million of borrowings in September 2018, which significantly reduced aggregate leverage to 28.3% as at 30 September 2018, from 35.4% as at 30 June 2018.

4QFY18 Financial Results

4Q2018
(S$’000)
4Q2017
(S$’000)
Change
Gross Revenue 32,477 38,306 (15.2%)
Net Property Income 21,611 26,735 (19.2)%
Distributable Income 21,421 19,397 10.4%
Distribution Per Unit (“DPU”) (cents) 2.40 2.41 (0.4)%

FY18 Financial Results

FY18
(S$’000)
FY17
(S$’000)
Change
Gross Revenue 133,306 156,551 (14.8%)
Net Property Income 89,272 113,843 (21.6%)
Distributable Income 82,726 78,600 5.2%
Distribution Per Unit (“DPU”) (cents) 9.60 9.82 (2.2)%

Gross Revenue

FY18 portfolio gross revenue of S$133.3 million was 14.8% lower year-on-year, mainly due to lower
occupancy rates for the Singapore properties, Central Park and 357 Collins Street, divestment of 55 Market Street on 31 August 2018, absence of a one-off payment in relation to a lease termination in Central Park in FY17 and effects of the average weaker Australia dollar compared with FY17.

Net Property Income

FY18 portfolio net property income (“NPI”) of S$89.3 million was 21.6% lower year-on-year mainly due to the lower gross revenue for the portfolio and higher maintenance expense for Caroline Chisholm Centre.

Summary

At the current share price of S$1.43 and FY18 total distribution per unit of 9.60 cents, the yield is 6.71%. As mentioned previously, my opinion is that the completion of Asset Enhancement Initiative works at Alexandra Technopark is one of the catalyst for Frasers Commercial Trust. In the longer term, we have to wait for the completion of construction works at China Square Central in 2H2019 before rental contribution comes back from China Square Central which can be the catalyst to drive the future DPU higher.

Another positive development is that in September 2018 the Urban Redevelopment Authority launched a Business Improvement District (“BID”) programme for the China Place precinct in which China Square Central is part of. The BID programme looks to enhance place management and vibrancy of the precinct through business-led efforts aided by seed funding provided by the Government.

The China Place BID will be synergistic with the on-going transformation of China Square Central and will further boost the long-term commercial potential of the development.

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