Tuesday, July 23, 2013

FCT - Another Record DPU

FraserCenterPoint Trust (FCT) announces its Q3 FY2013 results on strong operational performance with record-high gross revenue and DPU.
Gross Revenue and NPI
  • Q3 2013 gross revenue grew 12.4% year-on-year to a new high of $39.97 million, while NPI rose 15.4% year-on-year to $28.5 million.
  • This growth was bolstered by higher contributions mainly from anchor CausewayPoint and Northpoint.
  • Growth factors include higher occupancy after completion of AEI, positive rental growth, higher turnover rents and improved car park income.
Balance Sheet
  • Balance sheet remains solid with gearing level stabilizing at 30.4% as at 30 June 2013.
  • Effective interest rate is at 2.72% (higher than SPH Reits which stands at 2.35%) on its average maturity term at 3.10 years.
  • Interest Coverage is at 6.25x and one of the better performer amongst all other REITS.
Portfolio Occupancy
  • Overall occupancy improved from 98.2% to 98.4%.
  • Best performers are CausewayPoint and Northpoint - both which attributed the most to the NPI.
  • Yewtee Point occupancy are dropping to the low 90s%.
  • Substantial portion of leasing for CausewayPoint and Northpoint are subject to lease renewals in FY2014 and FY2015. These two accounted for 76% and 79% of the total gross rental revision.
  • Higher lease rentals are expected to match the recent AEIs completed for both occupancies.
  • Suburban malls may face competitions from the likes of recent suburban malls built - Bedok Mall, Seletar Mall, JEM, etc.
My take
I think the active management approach from FCT are contributing favorably to its investors. Two of the most contributor to the NPI - CausewayPoint and Northpoint are subject to lease renewals within the next 2 years. Assuming the same rate they are leasing, investors can expect a steady 10% growth on its DPU. Dr. Chew, CEO of FCAM, mentioned that investors can take good heart from the fact that two of the largest contributing malls are expected to underpin FCT's performance going forward.
I don't think the acquisition for the Changi City Point will happen anytime soon. I think the management will take a cautious approach towards stabilizing the NPI and DPU growth, which is what they are good at. With the bulk of the debt maturing in FY2016, the management will want to make sure that this is tackled first before including FCT 6th malls into its portfolio.

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