KEY HIGHLIGHTS OF 1H2022 PERFORMANCE
1. YOY rental reversion rose 1.73% (incoming vs outgoing) and 4.12% (average vs average)
2. All refinancing for FY22 in place – extend debt maturity profile to 2.5 yrs (previously 2.1 yrs). Green loans are 22% of total borrowings
3. Some tenants are seeing sales exceeding pre-Covid levels
4. Around 68% of debt hedged to fixed rate, of the rest every 50 bps rise in SOR/SORA will have a -0.169 cts impact on DPU
5. Revenue +1.5% yoy, NPI + 3.8% yoy, Distributable income + 3.3% yoy. Full contribution from ARF offset by lost income from divested malls
Q&A
DPU retention
Retained $4.8m out of prudence (no specific reason) as there was no visibility on the timing of reopening. FCT has historically done this over the years
Inflationary cost pressures
Operating expenses – working to find ways to improve productivity/efficiency
Progressive wage model is in place for security and cleaning staff so cost can only go up
Utilising tech – eg smart cameras to reduce headcount (for security). For cleaners, using tech to reduce headcount – previously, one staff assigned per toilet vs “call on demand” now
Utilities contracts fully hedged. FY22 – only 1 ppty contract coming up end Aug
FY23 – 1 asset coming up for renewal at end Feb 23 – rest at end of May 2023
Hedging of interest rates
Increasing hedge position (54% last quarter. Now 68-70%).
1H2022 – average borrowing cost at 2.2%. To trend up in coming quarters – forecast for full year FY22F in the “mid 2s”
Occupancy Costs (now a low 16%) – room to raise rents?
More clarity now – retailers and shoppers all more confident v reopening
Bulk of renewals are done, 15% remaining
Aside from improvement in sales, remixing was done along the way (removal of non-performing tenants)
Occupancy cost reduced by strategies like introduction of speciality retailers (Waterway Point) and excellent tenants like Don Don Donki
No significant drop in rentals during the pandemic but there was some fall in short term vacancy. Being filled up now + converting these to permanent leases
Other income – outlook? (using 2019 as base – this makes up 10% of total revenue)
To rebound back stronger in 2H
Car park income should improve with removal of Trace Together
Casual leasing, A+P panels (other income sources) should pick up as well
Acquisitions
20% of Waterway Point – if the JV decides to sell, this would be 10% to FCT and 10% to Far East – potentially $130m (Waterway Point valued at $1.3b)
North Point City South Wing (valued at over $1b) from the sponsor. FCT currently owns North Wing which is back to pre-Covid levels
Ongoing discussions, they believe a single owner can bring great synergies.
Comfortable gearing helps them to act quickly if needed
Current bank spreads and cost of 5-yr loan
Spread still attractive and at comfortable range. When they refinance the $120m its still less than 3% all-in.
Omni-channel sales
FRX, Makan Master, E-Store, Omni-channel online sales at stores – all captured in GTO. Sales captured at head office or outside malls are not captured but leakage is very small
Makan Master – overall average not significant but driven by campaign and promotions (varies over months)
Seeing more usage – repeat customers etc
Platforms meant to help retailers and make it easier for consumers to shop
Pandemic has seen greater onboarding of retailers
Reopening of borders
All FCT malls are suburban so don’t really depend on tourists. Maybe Causeway Point (but not large)
Some trades doing well now off low base – luggage, winter products, travel agencies
No significant impact on the whole
Back to office
No immediate jump in footfall yet. Not back 100% for most workers yet. Hybrid is the way forward
Won’t be a rebound in traffic to pre-Covid levels anytime soon
Focus on sales – despite 60-70% of pre-Covid, sales have surpassed pre-Covid. Will be boosted by the return of transient customers