Frasers Centrepoint Trust 1Q Results Write-up

FCT has released its 1Q 19 results today.

DPU came in at 3.02 cents.

At today's trading price of $2.26, it offers 1.33% dividend for 1 quarter.

The Positives

1Q 19 vs 4Q 18

Gross Revenue( $ millions)	1Q 19	4Q 18	% Change
Causeway Point	21.76	21.53	1.07
Northpoint City North Wing	13.51	13.02	3.76
Changi City Point	6.83	6.92	-1.30
Yew Tee Point	3.55	3.45	2.90
Anchorpoint	2.11	2.04	3.43
Bedok Point	1.52	1.55	-1.94
Total	49.28	48.51	1.59

1Q 19 vs 4Q 18

Net Property Income( $ millions)	1Q 19	4Q 18	% Change
Causeway Point	16.84	15.44	9.07
Northpoint City North Wing	10	9.11	39.77
Changi City Point	4.51	4.41	2.27
Yew Tee Point	2.47	2.29	7.86
Anchorpoint	0.94	0.89	5.62
Bedok Point	0.62	0.73	-15.07
Total	35.39	32.87	7.67

•           From the 2 tables above, we can see that Quarter on Quarter ("qoq") net property income has improved by 7.6%. With the exception of Bedok Point, the rest of the areas have seen improvements throughout. This is definitely a positive for the reit.
•           Another positive for the reit will be its improving mall occupancy rates throughout all malls. Anchorpoint and Bedok Point in particular have improved their mall occupancy by 6.2% and 5% respectively

The Concerns

•          Northpoint City North Wing has recorded a negative rental reversion of -1.3%. This definitely is puzzling given that it has just underwent AEI. Even though in 3Q 18 (April 2018 to June 2018) rental reversions went up by 25.8% followed by 0.5% in 4Q 18, it seems like the positive rental reversions might have come to a halt. Coupled with 11.8% of gross rent to expire in FY 2019, it remains to be seen if gross revenue would exceed $52.21 million in 2018.
•          Anchorpoint records 3 consecutive quarters of negative rental reversions. While not a big mall under its portfolio, -32.8% in 3Q 18 followed by -10.4% in 4Q 18 and -12.1% in 1Q 19 would not be pleasing news to any investors. Coupled with 16 leases accounting for 43.1% of gross rent expiring in FY 19, future negative reversions would reduce the net property income from Anchorpoint further.
•          While not an observation from 1Q 2019 results, I have realised that the capitalisation rate has decreased in the 4Q 2018results(Slide 19) when compared to 4Q 2017. Assuming everything else is constant, a lower capitalisation rate results in higher valuation and this would affect net asset value .

What to lookout for in future results

·        Causeway Point's rental revision. In 1Q 19, 11.1% positive rental reversion is achieved. With 22.1% of gross rent of mall to expire in FY 2019, a double digit rental revision would definitely drive top and bottom-line.

·        Interest rate of refinancing. With $222 million or 27.1% of total borrowings to be refinanced this year, it would be interesting to see the new cost of borrowing after the loans have been refinanced.

Fun Fact

•         FCT has the lowest average cost of borrowings at 2.7% when compared to other reits such as SPH REIT(2.8%),Mapletree Commercial Trust(2.93%) and Capitaland Mall Trust(3.1%)