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Fortune REIT's FY18 DPU up 1% to 51.28 HK cents on positive rental reversions & car park income growth

Michelle Zhu
Michelle Zhu • 2 min read
Fortune REIT's FY18 DPU up 1% to 51.28 HK cents on positive rental reversions & car park income growth
SINGAPORE (Jan 28): The manager of Fortune REIT has declared a distribution per unit of 51.28 HK cents (8.8 cents) for FY18, up 1% from 50.78 HK cents in FY17 due to revenue growth and lower expenses.
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SINGAPORE (Jan 28): The manager of Fortune REIT has declared a distribution per unit of 51.28 HK cents (8.8 cents) for FY18, up 1% from 50.78 HK cents in FY17 due to revenue growth and lower expenses.

Revenue grew 0.2% y-o-y to HKD1.94 billion due to positive rental reversions from the retail segment as well as higher car park income.

NPI rose 1% to HKD 1.47 billion from HKD 1.46 billion a year ago.

Excluding Provident Square and Fortune Kingswood, which was divested in Feb 2018 and has been going undergoing asset enhancement initiatives (AEIs), respectively, revenue would have grown 3.9% and NPI would have been 4.5% higher y-o-y.

Total property expenses for FY18 fell 2.5% to HKD 422.6 million due to lower utility expenses, notwithstanding electricity tariffs.

Finance costs fell 0.6% to HKD 266.6 million despite a higher Hong Kong Inter-bank Offered Rate, as the increase was mainly offset by interest savings resulting from certain loan repayments.

The effective borrowing cost in 2018 was 2.89% compared to 2.47% in 2017, over a reduced amount of total debt.

In all, the cost-to-revenue ratio improved to 21.8% compared to 22.4% in FY17, which the manager attributes to disciplined cost control measures.

In a Monday filing, the REIT manager ARA Asset Management says the latest set of results marks the REIT’s 15th consecutive year of DPU growth.

With Fortune REIT’s strengthened financial position after the disposal of Provident Square, whose divestment proceeds were used for debt repayment, the REIT’s gearing has now been reduced to 20.9% compared to 27.4% in 2017.

Notwithstanding the divestment, the REIT portfolio’s valuation has grown by 8.2% to HK42 billion as at end-2018 as opposed to HKD 38.8 billion as at end-2017.

ARA Asset Management adds that AEIs at Fortune Kingwood are currently progressing smoothly, with the project scheduled for completion by phases by end-2019.

While it believes the REIT is well-positioned to deliver consistent results and sustainable returns for unitholders, the manager says it will continue to strengthen its core competencies by executing a proactive leasing strategy; adding value to the trust’s malls through AEIs; seeking yield-accretive investment opportunities; as well as maintaining a healthy capital structure.

Units in Fortune REIT closed 0.61% lower at HKD9.70 on Monday.

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