Frasers Centrepoint Trust (FCT) saw its distribution per unit (DPU) increase 0.1 percent to 3.04 cents in the third quarter ended 30 June 2016 from the previous year. This brings its nine-month DPU to 8.949 cents, up 2.3 percent over the same period a year ago.
Gross revenue for Q3 2016 dropped 4.4 percent to S$45.0 million while net property income fell 5.1 percent to S$31.2 million.
“The decline in gross revenue and net property income were due mainly to lower contributions from Northpoint, which is currently undergoing asset enhancement works (AEI),” said Frasers Centrepoint Asset Management, FCT’s manager, in an SGX filing.
Credit Suisse noted that FCT registered strong rent reversion in Q3 2016 at +8.3 percent.
“Causeway point, which accounted for 67 percent of renewals in Q3 FY2016 (by NLA), drove reversions with +9.4 percent; YewTee point followed this at +6.8 percent and Anchor point at +4.1 percent,” it said.
However, tenant sales were 1.8 percent lower year-on-year partly due to the lower occupancy at Changi City Point (transitional occupancy due to anchor tenant fit out) and Northpoint (AEI).
So far, the asset enhancement works at Northpoint was less disruptive than expected with occupancy hovering “at 81 to 82 percent in Q2 FY2016 compared to management’s initial expectations of 72 to 75 percent as tenants requested temporary lease extensions,” said Credit Suisse.
Meanwhile, FCT’s gearing creeped up by 0.3 percentage point due to debt taken to finance the AEI at Northpoint.
“FCT refinanced S$136 million worth of debt maturing in FY2016 on 4 July. The new debt is on a floating rate which brings the proportion of fixed debt down to 59 percent (from 74 percent in 2Q),” it said.
Since it is the policy of the management to keep at least 50 percent of debt hedged/fixed, Credit Suisse expects it to maintain the current ratio in the near term considering the favourable interest rate environment.
Rated outperform, FCT trades “at a CY16E dividend yield of 5.5 percent, in line with retail REIT peers at 5.3 to 5.9 percent, while its suburban mall portfolio should remain resilient,” said Credit Suisse.