Frasers Centrepoint Trust joins the STI: 5 things to know about the 'king of heartland malls'

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REITs

By Gerald Wong, CFA • 29 Feb 2024 • 0 min read

Frasers Centrepoint Trust (FCT) has been added to Singapore’s bellwether stock index. Here’s what investors need to know about this popular retail REIT.

frasers centrepoint trust fct sti inclusion
In this article

What happened?

The stocks that make up the Straits Times Index (STI) is set to change again.

Frasers Centrepoint Trust, or FCT, will be included in the STI following the March 2024 quarter review.

It will replace Emperador in the bellwether index which contains the 30 largest companies by market capitalisation on the Singapore Stock Exchange.

The STI changes will take effect at the start of business on 18 March 2024. 

The last time the STI saw changes to its constituents was when Seatrium replaced Keppel DC REIT in the June 2023 review

Frasers Centrepoint Trust’s share price has been steady despite macroeconomic headwinds. 

The REIT traded at $2.19 at the market close on 29th February 2024, close to the level it was at one year ago. 

frasers centrepoint trust fct share price march 2024

With its resilient share price performance, Frasers Centrepoint Trust’s market capitalisation is approaching S$4 billion.

Let us find out more about Frasers Centrepoint Trust with its inclusion into the STI.

What you need to know about Frasers Centrepoint Trust (J69U)

#1 – The 'king of heartland malls'

Frasers Centrepoint Trust is affectionately known as the “king” of heartland malls as its portfolio comprises nine suburban retail malls and an office building with total assets under management of around S$6.5 billion as of 31 December 2023.

Some examples of these suburban retail malls include NEX Mall, Waterway Point, Causeway Point, Tiong Bahru Plaza, Century Square, and Hougang Mall.

These heartland malls benefit from regular footfall from the catchment of HDB dwellers who shop for groceries, food, and daily necessities.

This characteristic makes FCT more resilient during economic downturns as the malls do not rely on tourists and foreigners as compared to downtown malls.

frasers centrepoint trust fct malls
Source: Frasers Centrepoint Trust

#2 – Close to full occupancy with improving shopper traffic and tenant sales

For Frasers Centrepoint Trust’s latest business update for the first quarter of fiscal 2024 (1Q 2024) ending 31 December 2023, its portfolio boasted almost full committed occupancy at 99.9%.

Aside from this impressive statistic, the retail REIT’s stable of retail malls also saw shopper traffic improve by 3.1% year on year for 1Q 2024.

As of December 2023, shopper traffic was just 12% below the average pre-COVID level.

Tenant sales pulled off a far better performance.

The quarter saw tenant sales fall marginally by 0.7% year on year because of renovations for several key anchor tenants.

Excluding these, tenant sales would have risen by 1.1% year on year and as of December 2023 were 20% above pre-COVID levels.

frasers centrepoint trust fct occupancy
Source: Frasers Centrepoint Trust

#3 – Moderate leverage with no refinancing risk for FY2024

Not only does Frasers Centrepoint Trust have commendable operating metrics, but its debt metrics also look healthy.

Aggregate leverage stood at 37.2% as of 31 December 2023 with an adjusted interest cover ratio of 3.3 times.

The REIT’s all-in cost of debt came in at 4.3% but it has 63.4% of its loans hedged to fixed rates to mitigate a further rise in interest rates.

The good news is that FCT does not need to refinance any debt due in fiscal 2024.

Around 27% of its debt is coming due in fiscal 2025, giving the REIT manager ample time to refinance these loans.

frasers centrepoint trust fct gearing
Source: Frasers Centrepoint Trust

#4 – Purchasing an additional 24.5% stake in NEX Mall

Frasers Centrepoint Trust is not content with just collecting steady rental income from its stable of retail malls.

The manager is also gunning for growth.

frasers centrepoint trust fct nex
Source: Frasers Centrepoint Trust

 

Back in January this year, the REIT announced the acquisition of an additional 24.5% effective stake in NEX mall at Serangoon for approximately S$523.1 million.

This acquisition will be funded by a combination of bank loans and a private placement of units and is subject to unitholders’ approval at an extraordinary general meeting.

Should the purchase go through, Frasers Centrepoint Trust will end up owning a 50% stake in NEX Mall.

NEX mall is the largest suburban mall by net lettable area in the northeast region of Singapore and serves roughly 36.2 million shoppers in fiscal 2023.

Conveniently linked to both the Circle and Northeast MRT lines as well as the Cross Island Phase I line in the future, the mall should benefit from an increase in population growth around the mall’s primary trade area.

The manager will implement asset enhancement initiatives (AEIs) to unlock value by reconfiguring the existing areas and refreshing and improving the retail offering.

The acquisition is also yield-accretive and is expected to raise Frasers Centrepoint Trust’s FY2023 distribution per unit by 0.4% to S$0.12204.

#5 – Conducting an extensive AEI for Tampines 1 Mall

Aside from acquisitions, Frasers Centrepoint Trust is also conducting an extensive AEI for Tampines 1 Mall.

The first batch of completed AEI units commenced operations in December last year and more than 97% of the AEI spaces have been committed.

The works are projected to be completed by September this year.

Apart from AEIs, the manager also continually refreshes the tenants within each mall to ensure vibrancy and to give shoppers something new to look forward to.

Some of these mall rejuvenation efforts include the introduction of new-to-portfolio brands such as Tim Hortons and NUDE seafood.

Tiong Bahru Plaza and Northpoint City North Wing have also been revamped with new food and beverage brands introduced (see above).

frasers centrepoint trust fct tampines 1
Source: Frasers Centrepoint Trust

What would Beansprout do?

Frasers Centrepoint Trust possesses strong financial and operating metrics and is also anchored by a strong sponsor in Frasers Property Limited.

The nature of its suburban malls also ensures that the retail REIT remains resilient during bouts of economic weakness.

We like that Frasers Centrepoint Point has been paying out consistent dividends. In the last fiscal year, the REIT paid out a total dividend per share of 12.15 cents. 

frasers centrepoint trust fct dividend

The REIT is currently trading at a price-to-book valuation of 0.9x, in line with its historical average.

frasers centrepoint trust fct valuation

Based on Frasers Centrepoint Trust’s share price of S$2.19 as of 29 February 2024, the REIT offers a dividend yield of 5.4%.

frasers centrepoint trust fct dividend yield

Frasers Centrepoint Trust's dividend yield is lower than Lendlease REIT’s yield of 7.0% and CapitaLand Integrated Commercial Trust’s dividend yield of 5.6%.

However, Frasers Centrepoint Trust does offer stability with its portfolio of resilient suburban retail malls that boast higher occupancy rates. 

Hence, we would add Frasers Centrepoint Trust to our watchlist if we are looking for stable REITs to add to our income portfolios.

To find out the dividend payment dates and calculate the amount of dividends you will receive, check out our Frasers Centrepoint Trust stock page.

Join the Beansprout Telegram group or Facebook group to get the latest updates on Singapore REITs, stocks, bonds and ETFs.

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