Frasers Commercial Trust's net property income slipped 5.8% to $21.7m

Here's what to blame.

Frasers Commercial Trust (FCOT) reported 2QFY14 gross revenue of S$28.6m, down 3.7% YoY due to a weaker AUD and lower occupancy at Central Park. NPI dropped 5.8% to S$21.7m, further impacted by higher expenses due to painting works undertaken at Caroline Chisholm Centre.

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On a cash basis, however, NPI would only be marginally lower by 0.5% at S$21.0m. We note that cash flows from the Australian properties were hedged via forwards and AUD-denominated loans.

Over the quarter, FCOT also continued to enjoy savings from its convertible perpetual preferred units (CPPU) distribution.

As a result, distributable income and DPU rose by 5.6% and 3.0% YoY to S$13.8m and 2.05 S cents, respectively.

We deem the results to be largely within view, as 2HFY14 DPU met 46.1%/47.1% of our/consensus full-year DPU forecasts.

Robust leasing activities

Expectedly, China Square Central (CSC) continued to bolster FCOT’s performance, raking up 14.5% growth in NPI amid higher occupancy and rental rates. This has helped to mitigate the softer showing at its Australian properties, which saw a 15.5% fall in NPI. Nevertheless, portfolio occupancy stayed at a high 97.5% (1Q: 97.1%). 

Leasing activities, particularly in Singapore, also remained robust, as 286,372 sqft or a sizable 12.6% of FCOT’s portfolio NLA, were committed, leased and renewed in the quarter. In addition, rental reversions ranging from 6.4% to 18.2% were achieved for the Singapore properties, reinforcing our view for a firm recovery in the domestic office rental market.