Fraser Commercial Trust Continue To Revamp Assets To Improve Yield



Key Highlights:

  • Fraser Commercial Trust's (SGX:ND8U) 4Q19 DPU was flat at 2.4 cents

  • The annualised yield and price to book ratio are 5.9% and 1.02 respectively



1. Dividends


Net property income and distribution per unit grew 0.5% to $21.6m. The increase was mainly due to

  • Higher contributions from Alexandra Technopark

  • Improved occupancy at Central Park


However, the increase in income was offset by

  • Higher amortisation of leasing incentives for Central Park and 357 Collins Street

  • Higher property tax

  • Weaker AUD currency


The annualised yield is 5.9%. It is currently trading near its historical low yield (5.5%).



2. Portfolio


Portfolio occupancy remains at 77.4%. However, the committed occupancy is at 95%. 12.5% of its leases will be up for renewal in 2020.

Portfolio leverage was down slightly to 28.6%. The interest cost is 2.97%, 87.8% of the loans are on fixed rates and 27.7% of the loans are due for refinancing next year. It is currently trading at a price to book ratio of 1.02.

3. Growth catalyst


The management is actively doing asset enhancement initiatives. The renovation at China Square Central has obtained TOP recently. The REIT manages to increase its retail space to 80,000 sf from 64,000 sf previously. And 80% of the space has been pre-committed.


The next asset enhancement will be on the Central Park, which is expected to be completed in third quarter of 2020. The enhancement will re-position it as one of the Perth's premium grade business locations.

Summary


The DPU has been remained flat for few years. While the management is working hard to improve the assets, we would continue to put it under our watchlist and observe its results in the next quarter.


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