Frasers Centrepoint Trust to buck the declining DPU trends among S-REITs

Full-year DPU reached its peak since 2006 listing.

Frasers Centrepoint Trust (FCT) 4Q distribution per unit (DPU) slid 1.5% to 2.859 cents amid lower revenue and income but the full-year result was actually its highest since it went public in 2016.

For the full year, FCT's DPU rose 1.3% to 11.764 cents.

Moving forward, DBS Vickers Securities believe that while many other S-REITs are expected to face declining DPUs over the next couple of years due to the slowing Singapore economy, FCT offers investors a steady DPU profile. This, it said, is made possible by FCT’s conservative strategy of paying the majority of its management fees in cash, which enables FCT to temporarily increase payment of fees in units to sustain DPU.

According to the brokerage firm, FCT is poised for a near-monopoly of shopping malls in the north with Northpoint and Causeway Point together is expected to contribute 70% of FCT’s Net Property Income (NPI).

"While it is still 15 months away until Northpoint completes its asset enhancement initiative (AEI), we believe strong rental reversion at Causeway Point will support earnings and cushion any pressures from any decline in occupancy rates.

Furthermore, DBS Vickers Securities notes that the Manager has proactively reduced the percentage of borrowings hedged into fixed rates to 59% from 74%, to benefit from their view that interest rates may stay low for an extended period.