Frasers Centrepoint Trust (FCT) is an SGX-listed real estate investment trust and one of the largest suburban retail mall owners in Singapore. The company’s portfolio comprises of nine retail malls and an office building. To date, FCT manages S$6.2 billion in assets under management (AUM) and is among the top ten largest S-REITs by market capitalisation.
In view of the current uncertain economic landscape, I was curious about FCT’s performance in the post-COVID environment and its management’s outlook on the year ahead. Year to date, FCT’s share price has risen by 7.3%, posing a strong start into 2023. To learn more, I attended FCT’s recent annual general meeting.
Here are seven things that I’ve learned from the 2023 Frasers Centrepoint Trust AGM.
1. Revenue grew 4.6% year-on-year to S$356.9 million while net property income (NPI) rose 4.9% to S$258.6 million for FY2022. FCT’s improved performance was due to contributions from the enlarged retail portfolio after the ARF acquisition, absence of rental rebates issued to tenants and higher turnover rental income from higher tenant sales. Growth was partially offset by loss of revenue from divested properties.
Tampines 1 and Hougang Mall contributed the highest growth year-on-year of 14.9% and 14.5% respectively. Refer to the table below for the revenue breakdown by location.
2. Distribution per unit (DPU) grew 1.2% to 12.227 cents compared to 12.085 cents a year ago. The increase in DPU in 2022 is due to growth in net property income (NPI) and distribution from joint ventures. Strong financial performance grew distributable income by 1.7%, to S$208.2 million.
3. Gearing ratio as of 30 September 2022 stood at 33.0%, from 33.3% in 2021. FCT has a well spread debt maturity and 71% of its borrowings are hedged at fixed interest rates (compared to 56% in 2021). The company’s total borrowings totalled to S$1,815 million with interest coverage ratio at 5.19 times.
4. FCT’s portfolio occupancy rates stand at 97.5%, higher than a year ago at 97.3%. This is higher than the average occupancy rate for suburban retail at around 94%. Management expects rates to remain stable in 2023 and believes that the suburban retail sector remains an attractive asset class despite the e-commerce growth during the last few years. Retail space supply is expected to remain low; growing just +0.7% p.a. in 2023 and 2024.
5. A unitholder asked about the breakdown of the various sector performances post-pandemic and amidst macroeconomic issues like interest rate hikes. The management reassured that overall performance of the various sectors have greatly improved. After the reopening of malls, sectors such F&B, grocery, fashion, health and wellness and jewellery are starting to pick up. However, there is a slight slowdown in the supermarket sector on a year-on-year basis. Although, the management highlighted that the sector’s past few years’ performance was inflated due to lockdowns.
When asked about any underperforming areas, the management said that there was no particular sector, and any underperformance would be a tenant-specific issue. With regards to this, FCT assures that they will continue to evaluate tenant performances and render necessary assistance when required.
6. A unitholder was curious about how digitalisation has impacted tenant sales and retail traffic for FCT. The management explained that they utilise cameras in malls to monitor retail traffic. Currently, FCT is back to 80% of pre-pandemic retail traffic levels. The reason why it is not back to 100% is due to the implementation of flexible work arrangements, which negatively impacted the morning shopper traffic some of its malls used to enjoy in the past. That said, the management believes that recovery is likely to remain stable moving forward.
Management also talked about its ‘Fraser Experience’ mobile application which is used to measure transaction volumes. The application provides opportunities for FCT to engage with retailers to push promotions and enhance retail sales. The management added that the mobile application serves as an avenue to collect customer data, allowing them to make better improvements.
7. In view of the trend of electric vehicles, a unitholder asked whether FCT has any plans to upgrade its carparks in malls. While it is an amenity that the management wants to provide customers with, it will be done progressively. Currently, the management does not prioritise it as the proportion of electric vehicles to gas vehicles remains relatively small. At the same time, they do not want to deprive other shoppers from getting their carpark lots. However, the management reassures that as the market trend continues in the future, they will make adjustments accordingly.
The fifth perspective
FCT has recovered to pre-pandemic levels in terms of revenue and DPU, and the management has a positive outlook for 2023. Its malls are well-located and continue to serve as important hubs in the suburban areas it serves. FCT remains Singapore-centric focus which means it is the only pure-play Singapore retail REIT.
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