FCT raises H1 DPU by 2.3% on improved operating, financial performance

FRASERS Centrepoint Trust (FCT) posted a 2.3 per cent rise in distribution per unit (DPU) to S$0.06136 for its first half ended Mar 31, 2022, from S$0.05996 a year ago, as the real estate investment trust (Reit) saw an improved operating and financial performance in the period.

The increase comes despite FCT retaining S$4.8 million of its taxable income available for distribution to unitholders in H1.

In a briefing accompanying the results announcement on Apr 27, the chief executive officer of FCT's manager, Richard Ng, said the retention was for “prudence” as the latest easing of Singapore’s Covid-related safe management measures had not yet been announced when the terms of the distribution were being worked out.

“When we made the decision, the announcement hadn't taken place. And so, while we were confident that we should expect more lifting of the measures, the clarity wasn't there,” Ng said.

“Largely, the amount set aside was just for prudence,” he added. “There’s another 6 months to go (in this fiscal year); we are doing well, but we want to be prudent.”

The retained amount is expected to be distributed in the second half. “As far as FCT is concerned, we distribute at least 90 per cent of all our taxable income every year,” Ng said.

For H1, distribution to unitholders rose 3.3 per cent on year to S$104.4 million, from S$101.1 million, on the back of higher income.

The distribution will be paid out on May 30, after books closure on May 9.

Gross revenue was up 1.5 per cent to S$176.2 million for the half-year period, from S$173.6 million a year ago.

This was due to the full contribution from its acquisition of a stake in AsiaRetail Fund, although it was partially offset by the loss of contribution from properties divested in FY2021, the manager said in a bourse filing on Wednesday (Apr 27).

Net property income grew 3.8 per cent on the year to S$130.5 million for the half year, from S$125.7 million, due to a decrease in property expenses from lower net allowance for doubtful debts and other property expenses.

Noting that retail sentiment was improving and day-to-day activities are gradually normalising, Ng said: “Riding on the tailwind of the easing Covid-19 restrictions and the reopening of the economy, FCT is well-positioned to navigate ahead.”

The Reit, which is one of the largest suburban retail mall owners in Singapore, also recorded better or steady occupancy at all its properties from the previous quarter.

Its retail property portfolio saw an improved committed occupancy of 97.8 per cent, up 0.6 percentage point from the previous quarter, while shopper traffic had increased to an average of around 65 per cent in the January to March 2022 period.

With reopening measures supporting retail sentiment and leasing demand, the manager also expects a further easing of safe management measures will support the recovery of the shopper traffic. 

Against the backdrop of rising interest rates, the Reit manager said it continues to exercise prudent capital management.

Some 68 per cent of its debt is hedged to fixed rate interest as of end-March, up from 54 per cent as at end-December 2021.

The Reit manager guided that its DPU is expected to fall by approximately S$0.00169 per annum for every 50 basis point rise in the Swap Offer Rate (SOR) or Singapore Overnight Rate Average (SORA).

FCT’s aggregate leverage stood at 33.3 per cent at as Mar 31, down from 34.5 per cent as at Dec 31, 2021. Interest cover is at 5.7 times, with an average debt maturity of 2.1 years.

Units of FCT closed up S$0.02 or 0.8 per cent at S$2.44 on Tuesday.