Wednesday, 3 May 2017

FCT FY17 Q2

FCT recently released its FY17 Q2 results. I am posting a very simple, top line quick glance of their results. These figures are the usual set of indicators I look at for very stable REITs such as FCT. should there be nothing that looks out of the norm, my homework for the REIT stops here. Nothing more nothing less, short and simple.

Overview
Revenue: $45m, a 2.9% drop y-o-y
NPI: $32m, similar 3.3%  drop y-o-y
NPI Margin: 71.2% vs 71.5% last year. same.
Income available for distribution: $28.5m vs $28.9m last year. minimal change.
Q2 DPU: 3.04c, same as last year.

Balance Sheet
Gearing saw a slight increase to 29.4% from 28.3% end FY16.

Interest Cover continues to be healthy at 7.56 times compared to 7.44 times end FY16.

but do note that FCT has a significant amount of debt maturing this FY: $191m or 24.6% of total borrowings.

Operational Performance
Overall occupancy is a lower 87.2% compared previous quarter 91.3%. Not surprising as this is due to Northpoint (NP)'s ongoing AEI. Fortunately, the third biggest mall in the portfolio, Changi City Point (CCP) managed to have increased occupancy from 85.9% to 89.7%.

NP's current occupancy is at 60.7%, very close to previous quarter 59.4% (inclusive Yishun 10 podium). Note that based on projection, this is about as low the occupancy as it can get, and from May 17 onwards, occupancy rates will improve to 66% and gradually rise from there till end of AEI. This means we can expect to see rising revenue contribution from NP, and it being the second largest mall in FCT portfolio, we can probably expect better results from here on.

Another important indicator i look at is the rental reversion. A positive rental reversion can be inferred that the mall is able to retain, or renew, tenants at a higher rental. This can further mean that tenants sales are chugging along just fine and they are fine to accept higher rental. This to me, is probably the single most important figure to look at, because it represents the fundamental health of a REIT's assets, and their ability to raise distribution in future.Taken together with occupancy rate, they say a lot of the properties strength

For FCT, it has not disappointed me here, as it enjoyed 4.1% positive rental reversion. Remarkably, CCP's 2 rental renewal enjoyed a 21.7% rental uplift. But, as usual, the lousy Bedok Point (BP)continue to see lower rental renewal at -17.9%.

As for lease expiry, 15.8% of gross rental will expire this FY. so probably need to pay attention to FCT's ability to renew their rental and look at occupancy rate, and whether its at a healthy reversion next 2 quarters.

Other comments
Amidst the fear or brick and mortar shop is dead and the heavy publicity of many vacant shopping malls, i honestly feel that FCT is doing just fine. Continued high occupancy rates, positive rental reversions, all business as usual. while the high end malls and strata titled shopping centres in core central region and Orchard Roads are suffering, its a far different scene in the suburban area, as seen from FCT's performance. Properties located at suburban town centre with nearby transport node are really resilient, serving nearby crowds more interested in daily purchase which are less affected by online shopping. Of course the capability of REIT manager plays a big part too. And FCT has done exceptionally well in this aspect, evident from its track record.

Except for Bedok Point that is still business-as-usually bad. Basket. Should probably sell this away.

And I secretly hope that FCT will do one acquisition this year (think management mentioned during one quarterly briefing before?), and i pray hard hard that it will be Waterway Point. I frequent there quite often and it is always jam-packed. Good mix of shops, new, spacious and giving out good vibe always. And with the soon-to-be completed Northpoint City, and its injection into FCT (which I am super damn sure that it will happen perhaps few years down the road), the future path is paved well for FCT. One day it could even challenge CMT hahaha.


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