Should You Invest In Frasers Centrepoint Trust [Fundamental Analysis]

In this article, we'll be conducting a fundamental analysis of Frasers Centrepoint Trust and its suitability to achieve the following investment objective: To deliver a stable dividend yield of 5% to 6% per year while having a high degree of capital preservation ability.

Information Is Accurate Up To Oct 2023

Business Description

Frasers Centrepoint Trust is a Retail REIT listed in 2006 and owns 12 properties in Singapore (11 suburban retail malls & 1 office).

What I Like About Frasers Centrepoint Trust:

Very stable distribution (Fig 8)
100% of their assets are in Singapore
Management has a very clear strategy (focus on suburban malls)
Portfolio occupancy and rental reversion are resilient (Fig 11 & 12)
Management has displayed competency in managing its debt

What I Do Not Like About Frasers Centrepoint Trust:

Updates From Recent Performance (FY 2023)

General Comments:

Topline performance improved due to higher occupancy rate and resumption of atrium income/events. This was partially offset by the asset enhancement initiative in Tampines 1.
No refinancing is required in 2024 but manager expects the average cost of borrowing for FCT to be above 4%.

Positive Headwinds:

Population and income growth will contribute to long-term earnings resiliency of the tenants and hence the portfolio.
Total gearing is expected to decrease once the divestment completes as management intends to use the proceeds to offset the loans. (pro-forma gearing ratio: 36.1%)

Negative Headwinds:

Potentially higher property expenses as a result of higher maintenance, utility and staff expenses.
Singapore’s external demand outlook remains weak due to an expected slowdown in the next 12 months (2024)

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Daniel is a Licensed Independent Financial Consultant with MAS and a Certified Financial Planner (CFP®).

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