Broker Information
- Report Date: October 25, 2024
- Broker: CGS International Securities
Financial Performance and Key Metrics
Frasers Centrepoint Trust (FCT) achieved an FY9/24 Distribution per Unit (DPU) of 12.0 Singapore cents, which represented a 0.9% year-on-year decrease, yet aligned closely with the broker’s forecast at 100.4% of the full-year expectation. FCT’s revenue for FY24 totaled S$351.7 million, with a net property income of S$253.4 million, reflecting a 4.9% and 4.6% year-on-year decrease, respectively, due to asset divestments and enhancements. The Trust has maintained an impressive 99.7% occupancy rate, underlining the stability of its portfolio. Additionally, tenant sales and footfall increased by 1.2% and 4.2%, respectively, during FY24.
Asset Enhancement Initiatives (AEI)
In August 2024, FCT completed a significant asset enhancement initiative (AEI) at Tampines 1, adding 9,000 square feet of net lettable area and achieving an ROI above 8%. This AEI contributed a valuation uplift of S$44 million for the property. A new AEI, valued at S$51 million, is planned for Hougang Mall, aiming for a target ROI of 7%. The project, to be phased between 2Q25 and 3Q26, will increase the F&B share of the mall’s net lettable area from 26% to 32%.
Leasing and Portfolio Reversions
The Trust reported positive rental reversions of +7.7% on retail leases signed during FY9/24, exceeding its previous period’s reversion of +7.5%. These gains are attributed to active tenant remixing, focusing on essential services within suburban malls. Tenant occupancy costs rose slightly to 16% in FY24, maintaining a stable range compared to historical levels of 16.6% to 17% from FY18–FY17.
Gearing and Debt Management
As of the end of FY24, FCT’s gearing ratio decreased to 38.5%, down from 39.1% in the prior quarter, reflecting higher portfolio valuation. The average cost of debt for FCT stands at 4.1%, with refinancing already secured for S$320 million, representing 15.7% of its total debt maturing in FY25. The Trust anticipates maintaining its borrowing costs around the low 4% level for FY25. FCT has increasingly leveraged green financing, with 72.5% of its borrowings as green loans by December 2023, up from 55.6% the previous year.
Outlook and Future Projections
CGS International reiterates an “Add” rating for FCT, with a DDM-based target price of S$2.68. The broker expects steady demand for space in FCT’s suburban malls, backed by an active asset management approach. Potential re-rating catalysts include higher-than-forecast rental reversions and the acquisition of remaining stakes in properties like Waterway Point and NEX. However, FCT’s growth may be impacted by factors such as lower consumer spending, which could reduce turnover rents and tenant leasing sentiment.
Environmental, Social, and Governance (ESG) Initiatives
Frasers Centrepoint Trust has made strides in sustainability, improving its LSEG ESG score to a combined B, with a strong A+ rating in ESG Controversies. All properties in its portfolio are now Green Mark certified, with five rated Platinum and five rated Gold. FCT has set an ambitious target to achieve net-zero carbon emissions by 2050. Recent green initiatives include a district cooling network at two malls, projected to reduce energy consumption by 17% and cut carbon emissions by 18%.
