Frasers Centrepoint Trust Is Acquiring New Malls

Frasers Centrepoint Trust Is Acquiring New Malls

Frasers Centrepoint Trust is acquiring new malls (Tiong Bahru Plaza, White Sands, Hougang Mall, Century Square and Tampines 1) to its portfolio. On 3rd September 2020, Frasers Centrepoint Trust (“FCT”) announced the proposed acquisition of the remaining approximately 63.1% of the total issued share capital of Asia Retail Fund Limited (“ARF”) for approximately S$1,057.4 million from a wholly-owned subsidiary of Frasers Property Limited, the sponsor of FCT.

Acquisitions

Frasers Centrepoint Trust New Malls

Currently, there are 7 malls under Frasers Centrepoint Trust. They are Causeway Point, Northpoint City, Waterway Point, Changi City Point, Yew Tee Point, Anchorpoint and Bedok Point. After the acquisition, the number of malls will be increased to 11. The additional malls are Tiong Bahru Plaza, White Sands, Hougang Mall, Century Square and Tampines 1. There is also one office property Central Plaza that will be part of the acquisition.

Divestments

This is good news for existing Frasers Centrepoint Trust holders. The manager is seeking to divest Bedok Point for a sale price of S$108.0 million. In my opinion, with strong competition from Bedok Mall (belongs to CapitaLand Mall Trust), Bedok Point has significantly under performed.

Prior to FCT’s proposed ARF Acquisition, ARF will be divesting Mallco Pte. Ltd., a wholly-owned subsidiary of ARF which holds Setapak Central, a retail mall in Malaysia, for a sale price of approximately S$39.7 million, to a wholly-owned subsidiary of the Sponsor. Hence, the Enlarged Retail Portfolio will not include Setapak Central.

Current Dividend Yield

Frasers Centrepoint Trust has paid out a total of 12.07 cents in 2019. Based on the current share price of S$2.64, this translates to a current dividend yield of 4.57%. This is before the COVID-19 pandemic.

The estimated dividend yield for 2020 can be lower given most retail REITs are impacted by this pandemic. This can be seen from the 2Q2020 financial results in April whereby the dividend was slashed by 48.7%.

Frasers Centrepoint Trust Share Price 4 Sep 2020

2Q2020 Financial Results

2Q2020
(S$’000)
2Q2019
(S$’000)
YoY(%)
Gross Revenue 50,168 49,733 0.9%
Net Property Income 35,964 36,444 (1.3%)
Distributable Amount (Before Capital Retention) 36,002 28,808 25.0%
Distributable Amount (After Capital Retention) 18,000 29,158 (38.3%)
Distribution Per Unit (“DPU”) (cents) 1.610 31.37 (48.7%)

Frasers Centrepoint Trust 2Q2020 Financial Results

Waterway Point

I have written about My Personal Analysis of Frasers Centrepoint Trust back in the year 2017. Till date, Frasers Centrepoint Trust has 7 suburban malls in its portfolio. They are Causeway Point, North Point, Waterway Point, Changi City Point, Bedok Point, Yew Tee Point and Anchor Point. Frasers Centrepoint Trust also held 31.17% of the units in Hektar Real Estate Investment Trust (“H-REIT”).

What is the impact of COVID-19 pandemic to Frasers Centrepoint Trust? How does Frasers Centrepoint Trust fare against Capitaland Mall Trust? Let us take a look at its latest financial results below.

On 23rd April 2020, Frasers Centrepoint Trust has released their 2Q2020 financial results. Gross revenue improved by 0.9% to S$50.2 million. However, Net Property Income (“NPI”) fell 1.3% to S$36.0 million.

Distributable income increased by 25.0% to S$36.0 million. As Frasers Centrepoint Trust decided to retain 50% of the distributable income to preserve financial flexibility in current time of uncertainty, the final distributable income declined by 38.3% to S$18.0 million. A distribution per unit (“DPU”) of 1.61 cents was declared which is a declined of 48.7% as compared to 2Q2019.

2Q2020 Financial Results

2Q2020
(S$’000)
2Q2019
(S$’000)
YoY(%)
Gross Revenue 50,168 49,733 0.9%
Net Property Income 35,964 36,444 (1.3%)
Distributable Amount (Before Capital Retention) 36,002 28,808 25.0%
Distributable Amount (After Capital Retention) 18,000 29,158 (38.3%)
Distribution Per Unit (“DPU”) (cents) 1.610 31.37 (48.7%)

Occupancy

As of 31st March 2020, the overall portfolio occupancy is 96.1%. With the COVID-19 temporary measures in place, landlords will not be able to terminate the lease of tenants or claim back the rented premises if the tenant is unable to pay the rent during the relief period of 6 months.

The manager of Frasers Centrepoint Trust had passed on the full property tax rebate to qualifying tenants. Tenants can utilize their cash security deposits to offset one month’s rental. Under the S$45m Tenant Support Package (“TSP”) enhancement, one month of rental rebate will be provided to tenants in targeted manner, prioritised by their needs and circumstances. There will also be one month rental waiver to all entertainment, education and tuition centre tenants affected by the mandatory closure orders from 26 March 2020 to 30 April 2020.

Frasers Centrepoint Trust 2Q2020 Financial Results

Debt

As of 31st March 2020, gearing ratio stood at 37.4%.

Current Dividend Yield

Based on the full year FY19 distribution of 12.07 cents and current share price of S$1.99, this translates to current dividend yield of 6.07%.

Frasers Centrepoint Trust 2Q2020 Financial Results

Summary

The current dividend yield of 6.07% is definitely attractive. As we are coming to the end of “Circuit Breaker”, more shops are opening up. This should bring back some shoppers.

However, as we are still in the midst of the COVID-19 pandemic, I will advice to buy in small lots because nobody can foresee the depth of the financial impact created by the COVID-19 pandemic, especially to the retail segment.

Similarly like Capitaland Mall Trust, I shall continue to monitor the financial results in the upcoming quarters.