Goodbye 2022, Hello 2023

Stock Analysis of Frasers Centrepoint Trust in 2023

Frasers Centrepoint Trust Waterway Point

This is my stock analysis of Frasers Centrepoint Trust (SGX:J69U) in 2023. Frasers Centrepoint Trust has been a long standing REIT and let us understand its history and performance over the last 5 years.

Let me start off with the historical overview of Frasers Centrepoint Trust. In 2006, Frasers Centrepoint Trust was listed on the Singapore Stock Exchange (SGX) with a portfolio of three suburban malls valued at S$915 million and Net Lettable Area (NLA) of 638,486 square feet.

If you wonder what the 3 malls are, they are Causeway Point, Northpoint and Anchorpoint. Today, Frasers Centrepoint Trust is one of the largest suburban retail mall owners in Singapore.

There are a total of 10 suburban malls under its portfolio. They are:

  1. Causeway Point
  2. Waterway Point (40.00% stake)
  3. Tampines 1
  4. Northpoint City North Wing and Yishun 10 Retail Podium
  5. Tiong Bahru Plaza
  6. Century Square
  7. Changi City Point
  8. Hougang Mall
  9. White Sands
  10. Central Plaza

Financial Summary

In this section, let us look at its latest full year FY2022 financial results and the past 5 years financial performance.

Frasers Centrepoint Trust Full Year FY2022 Financial Results

In FY2022, Gross Revenue grew 4.6% to S$356.9 million. Net Property Income (NPI) grew 4.9% to S$258.6 million. Distribution Per Unit (DPU) also increased 1.2% to 12.227 cents.

FY2022
(S$’000)
FY2021
(S$’000)
Change
Gross Revenue 356,931 341,149 4.6%
Net Property Income 258,597 246,567 4.9%
Property expenses
(98,334) (94,582) 4.0%
Amount Distributable To Unitholders 208,190 204,674 1.7%
Distribution Per Unit (“DPU”) (cents) 12.227 12.085 1.2%

Frasers Centrepoint Trust 5 Year Financial Performance

The below was extracted from Frasers Centrepoint FY2022 Annual Report that was released on 22 December 2022.

The manager has proven that it was able to grow its Revenue, Net Property Income, Distribution Per Unit (DPU), Net Asset Value year-on-year.

Debt

Frasers Centrepoint Trust has been assigned a corporate rating of “BBB” with a stable outlook by S&P and a corporate rating of “Baa2” with a stable outlook by Moody’s.

I noticed that since FY2020, the manager has also reduced its gearing from 39.5% in FY2020 to 33.0% in FY2022. Whether it is good foresight or unintentionally planned for, it turns out to be a good thing to reduce debt under the high interest rate environment.

70.5% of Frasers Centrepoint Trust’s total borrowings are on fixed interest rates.

Average debt to maturity stood at 2 years.

Distribution History

Similar to other REITs, Frasers Centrepoint Trust moved to half-yearly financial announcement and half-yearly distribution payment with effect from the second half of its financial year 2020.

Based on the current share price of S$2.08 on 27th December 2022, the current dividend yield is 5.88%.

Frasers Centrepoint Trust 5 Year Trading Performance

I usually look at the current dividend yield to decide my satisfactory entry price. I know many investors look at Net Asset Value versus current share price but as a dividend investor, I focused more on the current dividend yield.

Below is a good reference on Frasers Centrepoint Trust’s lowest share price and highest share price in the past 5 years. The lowest closing share price is S$1.64 and highest is S$3.04. You can use this to work out your satisfactory entry price.

Occupancy

As at 30 September 2022, the portfolio committed occupancy stood at 97.5%.

Summary of My Stock Analysis of Frasers Centrepoint Trust in 2023

Below are the pros and cons should you decide to invest in Frasers Centrepoint Trust.

Pros

  • Positive rental reversion
  • Higher portfolio occupancy at 97.5%
  • Low aggregate leverage of 33.0%
  • 70.5% of Frasers Centrepoint Trust’s total borrowings are on fixed interest rates
  • Constant dividend payout in the past 5 years
  • Proven 5 years track record to increase DPU year on year
  • Acquisition of the additional 10.00% stake in Waterway Point to be completed in FY2023

Cons

  • Higher operating costs, supply chain disruptions due to ongoing war between Russia and Ukraine
  • Slightly low dividend yield at 5.88% based on share price of S$2.08
  • Persistent inflation impacts DPU as Fed continue interest rate hikes

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