Frasers Centrepoint Trust: Little Surprises With Recent Results

seekingalpha10-26

I maintain a Hold rating for Frasers Centrepoint Trust, as the company's latest fiscal year results are aligned with expectations, and the stock has limited near-term re-rating potential.The REIT's ...

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overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nFrasers Centrepoint Trust: Little Surprises With Recent Results\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-10-26 20:47 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4729876-frasers-centrepoint-trust-little-surprises-with-recent-results><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>I maintain a Hold rating for Frasers Centrepoint Trust, as the company's latest fiscal year results are aligned with expectations, and the stock has limited near-term re-rating potential.The REIT's ...</p>\n\n<a href=\"https://seekingalpha.com/article/4729876-frasers-centrepoint-trust-little-surprises-with-recent-results\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4231","symbol_name":"零售房地产信托","start_time":0,"source_url":"https://seekingalpha.com/article/4729876-frasers-centrepoint-trust-little-surprises-with-recent-results","article_id":"2478979650","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/836709534/image_836709534.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2478979650","pubTimestamp":1729946822,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"I maintain a Hold rating for Frasers Centrepoint Trust, as the company's latest fiscal year results are aligned with expectations, and the stock has limited near-term re-rating potential.The REIT's ac","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4231":"零售房地产信托","BK4080":"零售业房地产投资信托","FRZCF":"Frasers Centrepoint Trust"},"translate_title":"Frasers Centrepoint Trust：最近的结果并不令人意外","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"FRZCF":0.9},"content_text":"I maintain a Hold rating for Frasers Centrepoint Trust, as the company's latest fiscal year results are aligned with expectations, and the stock has limited near-term re-rating potential.The REIT's actual FY 2024 gross revenue and distribution per unit were very close to their respective consensus forecasts.Frasers Centrepoint Trust is already trading at a premium over its peers, and investors might prefer other high yielding Singapore retail REITs.   RUNSTUDIO My rating for Frasers Centrepoint Trust (OTCPK:FRZCF) [J69U:SP] stays as a Hold. The REIT's latest fiscal year results offered little surprises, and my view is that a positive re-rating of its valuations for the near term is less likely. This explains why I am sticking with a Neutral view for FRZCF. I looked at the \"external and internal factors affecting\" Frasers Centrepoint Trust in my earlier update published on June 1, 2024. Investors can deal in the REIT's shares on the Singapore Exchange and the OTC (Over-The-Counter) market. The trading liquidity for Frasers Centrepoint Trust's OTC shares is low. On the flip side, the average daily trading value for the REIT's Singapore-listed shares is pretty decent at around $7 million for the past three months as per S&P Capital IQ data. US brokerages such as Interactive Brokers allow their clients to buy and sell Singapore-listed shares like those of Frasers Centrepoint Trust. Most Recent Fiscal Year Results Were Largely In Line With Expectations Frasers Centrepoint Trust announced the REIT's full-year financial results for FY 2024 (YE September 30, 2024) on Friday, October 25. The REIT's key financial metrics for the latest fiscal year were largely aligned with the sell side's expectations. Gross revenue for Frasers Centrepoint Trust decreased by -4.9% from S$369.7 million in FY 2023 to S$351.7 million for FY 2024. The REIT's most recent fiscal year top line was -0.7% below the analysts' consensus projection of S$354.1 million according to data taken from S&P Capital IQ data. Frasers Centrepoint Trust's distribution per unit for FY 2024 was S$0.12042, which represented a -0.9% decline as compared to its FY 2023 dividend of S$0.12150 per unit. The market's consensus FY 2024 dividend per unit estimate for the REIT was S$0.11947 as per S&P Capital IQ data, so Frasers Centrepoint Trust's actual dividend for FY 2024 was +0.8% above the market's expectations. Also, the REIT's adjusted gross revenue expansion for FY 2024 was roughly on par with its gross revenue increase in FY 2023. In its FY 2024 results press release, FRZCF revealed that its adjusted gross revenue would have increased by +3.5% in the recent fiscal year, excluding the effects of the sale of the \"Changi City Point\" asset and the ongoing Asset Enhancement Initiative for the \"Tampines 1\" asset. As a comparison, the gross revenue for Frasers Centrepoint Trust grew by a similar +3.6% for FY 2023. A stable low-single digit percentage gross revenue expansion on a yearly basis for Frasers Centrepoint Trust, which has a portfolio of defensive sub-urban retail assets in Singapore, is fairly reasonable. As such, I don't think there are any surprises with the REIT's top line performance for the latest fiscal year. Separately, the REIT's distributable income increased by +3.2% in FY 2024, despite a -4.9% contraction in headline gross revenue. The negative impact of the Tampines 1 asset enhancement as mentioned above was more than offset by the positive impact of increased cash flow resulting from a larger amount of REIT management fees paid in units (rather than cash). The REIT manager had intentionally accepted a bigger part of its REIT management fees in units (as opposed to cash) to offset the lower revenue contribution from the Tampines 1 asset undergoing asset enhancement. Specifically, FRZCF's asset management fees paid in units increased from S$11.6 million for FY 2023 to S$25.6 million in FY 2024. But Frasers Centrepoint Trust's distribution or dividend per unit still decreased by -0.9% for the most recent fiscal year, notwithstanding the +3.2% growth in distributable income. This is because the REIT did a private placement in January 2024, which increased its number of units or shares outstanding by +6.0% for end-FY 2024 vis-a-vis end-FY 2023. It is reasonable to refer to Frasers Centrepoint Trust's latest FY 2024 set of results as one with little surprises. The REIT's key metrics, gross revenue and distribution per unit, for the most recent fiscal year were within 1% of the respective consensus financial forecasts. FRZCF Is Trading At A Premium To Peers With Limited Short-Term Re-Rating Potential The market currently values Frasers Centrepoint Trust at a premium over its Singapore retail REIT peers, and I don't think that FRZCF has significant valuation re-rating potential in the short term. In my October 14, 2024 article on Singapore industrial REIT CapitaLand Ascendas REIT (OTCPK:ACDSF) [A17U:SP], I noted that \"P/B is an appropriation valuation metric for Singapore REITs because their properties are carried at market values (determined by third-party valuers) on their balance sheets as per International Financial Reporting Standards.\" This explains why I am also using the P/B metric to value Frasers Centrepoint Trust and its Singapore retail REIT peers. Peer Valuation Comparison For Frasers Centrepoint Trust   REIT Trailing Twelve Months' Dividend Yield Trailing P/B Multiple   Frasers Centrepoint Trust 5.3% 1.02   Lendlease Global Commercial REIT (OTCPK:LLGCF) [JYEU:SP] 6.8% 0.75   Starhill Global REIT (OTCPK:SGLMF)[P40U:SP] 7.1% 0.71   Click to enlarge Source: S&P Capital IQ Frasers Centrepoint Trust is now trading at a higher P/B ratio and a lower dividend yield than its key peers as per the chart presented above. There is a key difference between FRZCF and its retail REIT peers. Frasers Centrepoint Trust is largely focused on sub-urban retail malls in Singapore. In contrast, Lendlease Global Commercial REIT's main asset is \"313 Somerset\" at Orchard Road, while Starhill Global REIT's key property is \"Wisma Atria\" at Orchard Road. Retail malls situated in Orchard, a popular area for tourists to shop in Singapore, have a greater exposure to tourist traffic and are therefore more economically sensitive than sub-urban shopping centers. In its investor presentation, FRZCF had described its sub-urban malls as venues for \"necessity & convenience shopping\", \"everyday dining\", and \"essential services.\" The market has already awarded a significant valuation premium to Frasers Centrepoint Trust for its exposure to defensive sub-urban retail assets. According to Singapore research firm Phillip Capital's recent October 18, 2024 research report, Frasers Centrepoint Trust was the \"worst performer\" in terms of share price performance (-3.4%) among Singapore-listed REITs last month. In my opinion, investors' sentiment has shifted towards higher yielding and riskier REITs in an environment of declining interest rates, which explains why a defensive REIT like Frasers Centrepoint Trust was sold down in the previous month. In a nutshell, Frasers Centrepoint Trust is currently enjoying a meaningful valuation premium over its key peers. I don't expect P/B multiple expansion or dividend yield compression for this REIT in the short term, as investors have shown a preference for higher yielding REITs in this current interest rate environment. This suggests that investors could be re-allocating funds from Frasers Centrepoint Trust to other high yielding and less defensive REITs, which will put a cap on FRZCF's re-rating potential. Conclusion I am still rating Frasers Centrepoint Trust as a Hold. I have considered the REIT's recent financial performance, its valuations, and investor sentiment in making this decision.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. 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