Frasers Commercial Trust's net property income dipped 3.5%

Lower occupancy, weaker AUD.

According to OCBC Investment Research, Frasers Commercial Trust (FCOT) delivered 1QFY14 NPI of S$22.1m, down 3.5% YoY due to a weaker AUD, lower occupancy at Central Park and absence of contribution from its divested Japan properties.

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However, the softer NPI was more than offset by a realized gain from its cashflow hedges, lower interest expenses and savings in the convertible perpetual preferred unit (CPPU) distribution following the net conversion/redemption of the CPPUs.

As such, distributable income to unitholders jumped 33.4% YoY to S$13.7m, while DPU climbed 29.7% to 2.05 S cents.

This falls within market expectations, as the quarterly DPU constitutes 22.9%/23.3% of our/consensus full-year DPU projections.

Portfolio continued to exhibit resilience China Square Central (CSC) and 55 Market Street were the key performers for 1Q, raking up NPI growth of 15.4% and 9.6% respectively on the back of higher secured rental and occupancy rates.

As a result, Singapore portfolio contributed 50% of FCOT’s NPI, up from 47% in the prior quarter. Domestic leasing demand remained relatively buoyant in our view, as positive rental reversions ranging from 10.7% to 20.7% were achieved during the quarter.

On the portfolio front, occupancy rate was also stable at 97.1% (4QFY13: 97.9%), while weighted average lease to expiry was largely unchanged at 4.4 years (4QFY13: 4.6 years).