I currently held 1% of Frasers Commercial Trust in my stock portfolio. I have always wanted to increase my stake in Frasers Commercial Trust and thus here I am monitoring its results closely. Frasers Commercial Trust announced their 3Q2019 financial results on 22nd July 2019.
The distribution per unit (“DPU”) has remained largely unchanged over the past quarters, in fact I noticed they have been maintaining the same distribution over a year or more. That is actually good news for investors but a little growth might even be better.
3QFY19 Financial Results
| 3Q2019 (S$’000) | 3Q2018 (S$’000) | Change | |
| Gross Revenue | 30,215 | 32,494 | (7.0%) |
| Net Property Income | 19,753 | 20,371 | (3.0)% |
| Distributable Income | 21,779 | 21,248 | 2.5% |
| Distribution Per Unit (“DPU”) (cents) | 2.40 | 2.40 | 0% |
Gross revenue for 3Q2019 fell by 7% as compared to 3Q2018. This was due to the weaker Australian dollar. If you remember, Frasers Commercial Trust has the following Australian properties in its portfolio, namely Central Park, Caroline Chisholm Centre and 357 Collins Street. There was also lower occupancy at Alexandra Technopark and the lacking of rental due to the divestment of 55 Market Street on 31. These were offset by a higher rents achieved from China Square.
What I like about Frasers Commercial Trust is its low gearing ratio of 29.3%. This means that there is a possibility of future acquisitions. Personally, I felt that the manager is conservative as compared to Frasers Logistics and Industrial Trust whereby the manager is aggressive in acquisitions.
With the leasing from Google at Alexandra Technopark, the average occupancy rose to 94.1%. There is another potential risk that may impact its occupancy. Majority of Microsoft space is expiring in Jan 2020.
Remember that China Square was closed for a period of time for Asset Enhancement Initiatives (AEI)? The AEI is completed and the 304-room Capri by Fraser, China Square hotel commenced operations in May 2019.
Based on the current closing price of S$1.60 and historical dividend payout of 9.60 cents, this translate to a current dividend yield of 6%. This is attractive but beware of the potential risk of Microsoft pulling out of Alexandra Technopark in Jan 2020.