Frasers Commercial Trust to pay aggregate $21.6m in DPU in Q1 2019

This represents a 7% annualised distribution yield based on the unit closing price of $1.37 in December 2018.

Frasers Commercial Trust (FCT) announced it would pay distribution in respect of units for the Q4 2018 period amounting to an aggregate $21.6m which equals to a $0.024 distribution per unit (DPU).

The amount represents an annualised distribution yield of 7% based on the firm’s unit closing price of $1.37 as of December 2018, FCT highlighted in a statement.

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“Excluding the distribution of $3.8m worth of capital gains, underlying Q1 2019 DPU would have fallen 8% YoY to $0.0198,” DBS Equity Research analysts commented in a separate report. The decline in underlying DPU was attributed to the absence of income following FCT’s sale of commercial development 55 Market Street, the depreciation of the AUD and lower occupancy at Alexandra Technopark (ATP).

These factors also resulted in the 11% and 15% YoY decline in FCT’s Q1 2019 revenue and net profit income (NPI), respectively.

“The majority of FCT’s properties reported weaker YoY performances,” the analysts noted, citing how NPI for China Square Central slipped 3% YoY to $3.8m on the back of lower effective occupancy amidst an overall committed property occupancy increase from 93.2% to 97.2% in Q1 2018. Earnings for its Australian properties Central Park and 357 Collins Street were also impacted by higher amortisation lease incentives, although committed occupancy at the two developments were stable at 71.5% and 98.9%.

Meanwhile, earnings contributions from ATP also fell 24% YoY to $5.8m as HP progressively moves out of the property. The firm vacated a 93,195 sqft space in December 2018, with plans to vacate its last remaining space in Q2 2019 which is equivalent to 9% of ATP.

“This should result in occupancy dropping approximately 60%,” the analysts noted. However, reports have indicated Google may be close to signing a lease to occupy around 400,000 sqft of space at ATP which could plug the hole left by HP.

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Following lease renewals, an estimated 11% of lease by gross rental income will be up for renewal for the remainder of FY19 which is down 13% QoQ, the report stated. “We understand FCT was able to achieve positive rental reversions at China Square Central whilst slight negative reversions were recorded at ATP,” the analysts commented.

“We remain bullish on FCT’s medium-term prospects as we believe, upon the backfilling of the vacant space at ATP, FCT’s DPU will no longer be reliant on capital distributions and its recent expansion into the UK now places the real estate investment trust (REIT) back on the growth path,” the analysts concluded.