Frasers Centerpoint Trust Retained 50% Of Its Distributable Income



Key Highlights

  • Distribution per unit (DPU) tumbled 48.7%

  • Portfolio remains strong with positive rental reversion

  • Retail sales in Q2 would be low during this Circuit Breaker period



1. Distribution per unit


2Q2020 gross revenue went up 0.9% to $50.2m. This was mainly contributed by rental increases from renewals and step-up rents of existing leases. However, its DPU tumbled 48.7% as the REIT decided to retain 50% of its distributable income for greater financial flexibility during this uncertain period.


At its current price, the REIT is currently trading at an annualised yield of 4.4%.



2. Portfolio occupancy and rental reversion


While there was positive growth in shopper traffic in Jan, it slowed down significantly in Feb and Mar, and it is likely to be negatively impacted from April to June. During this quarter, the REIT has renewed 112 leases, with an average positive rental reversion of 5.4%. Good news is all anchor tenants who are due for renewal this year have been renewed. Portfolio occupancy dropped slightly to 96.1%.



3. Growth Catalyst


With the Circuit Breaker in place, the tenants sales in quarter 2 are expected to be slow. Together with the rental rebates, the upcoming distributable income is likely to be adversely impacted.


Summary


Fraser Centerpoint Trust is well-positioned with a portfolio of suburban malls, which is also aligned with the government direction to develop the suburban areas. However, with uncertainty of Covid-19, we would definitely see slowing retail sales and drop in distributable income. The REIT is currently trading at 4.4% annualised yield.


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