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Saturday, July 25, 2020

Frasers Centrepoint Trust Analysis @ 25 July 2020

Basic Profile & Key Statistics
Frasers Centrepoint Trust (FCT) is a REIT that owns retail properties in Singapore. It was listed on 5 July 2006. 
Lease Profile
Occupancy is healthy at 94.6%. WALE is short at 1.61 years as compared to other SREITs with retail properties in Singapore. 32.3% of lease expiry falls in FY2022, which posts a concentrated lease expiry risk. Weighted average land lease expiry at 70.74 years is very closed to SREITs median level.

Debt Profile
Gearing is healthy at 35%. Cost of debt is low at 2.5% despite its 76.3% of unsecured debt. Fixed rate debt is low at 50% which is favorable to the current low-interest environment. 34.2% of debt maturity falls in FY2023, the level is slightly above SREITs median. Interest cover ratio is high at 4.8 times. WADE is short at 2.3 years.

Diversification Profile
FCT is not diversified in terms of geographical and property. Its flagship property, Causeway Point contributes 36.7% of gross income. However, it is quite diversified in terms of tenants, where top tenant and top 10 tenants contribute 3.2% and 21.5% gross revenue respectively.

Key Financial Metrics
Property yield is slightly low at 5.2%. Due to distribution retention for COVID, Management fees over distribution, distribution on capital and distribution margin figures are affected. Without retention, management fees over distribution would be 14.5% which translates into $6.90 dividend for every dollar paid. Distribution on capital would be 4% and distribution margin would be 57.6%.

Related Party Shareholding
The sponsor and REIT manager hold significant shares in FCT. However, directors of REIT manager shareholding is low.

If we consider distribution without retention, DPU trend is slightly upward, while distribution margin is more and less maintain. NAV per unit is on uptrend.

Fundamental Valuation
Favorable Less Favorable
Cost of Debt WALE
Interest Cover Ratio Concentrated Lease Expiry
Top Tenant & Top 10 Tenants Contribution WADE
NAV Uptrend Top Geographical Contribution
Distribution Margin Top Property Contribution
With its acquisition of an additional 12.07% interest in PGIM ARF, its performance would definitely be improved.  

Relative Valuation
i) Average Dividend Yield
Dividend yield of 4.23% is based on annualized DPU for the past 1 year. Apply annualized DPU of 10.112 cents to average yield of 5.35% will get S$ 1.89. However, if we take annualized DPU without retention for COVID, we will get 12.256 cents, which translates into S$ 2.29.
ii) Average Price/NAV 
Average value is at 1.08, apply latest NAV of S$2.213 will get S$ 2.39

Author's Opinion
FCT just adopted half-yearly reporting, so it has not disclosed the performance of the 2Q calendar year (3Q FY). From the crowd in retail after phase 2 opening, business operation should be improved,  albeit there is a risk of second COVID wave. For valuation:
i) Fundamental Intrinsic Value = (Removed)
ii) Relative Valuation - Dividend Yield = S$ 2.29
iii) Relative Valuation - Price/NAV = S$ 2.39
At the current price of S$2.39, it seems that the current price is at a fair price.

*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee the accuracy, completeness, and reliability. It should not be taken as financial advice or statement of fact. I shall not be held liable for errors, omissions as well as loss or damage as a result of the use of the material in this blog. Please always do your own due diligence before any decision is made.

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