Frasers Centrepoint Trust (J69U) Earnings Call Transcript & Summary

Good morning, and welcome to Frasers Centrepoint's Results Announcement for Second Half and the Financial Year 2024 Ended 30th September 2024. We have put out the results announcement this morning on the SGXNET, and we hope you have the chance to go through them. And we are very pleased today to have the management team, led by Richard, the CEO; Annie, the CFO; and our Head of Asset and Investment Management, Pauline Lim and the IR head here, to give you the go-through of today's results. Without further ado, let me hand this over to Richard to kick off the presentation. Richard, please?

Yes. Thanks, Fung Leng, and good morning, everybody. Thanks for joining us this morning. And as what Fung Leng mentioned, just now the deck has really been uploaded. So hopefully, you guys have some time to go through and digest the deck so that we could have some discussion at the end of this presentation. So I'm just going to go dive right in to share some of the key highlights. Firstly, on the financial front, if you look at this slide it seems to suggest that both our revenue and NPI has dropped slightly over 4%, but maybe want to compare like we might when we exclude Changi City Point, which was sold in October last year and also the impact of companies. So we actually did better, more than 3% higher in terms of revenue and also NPI. Some of the details, any we share a little bit later. Next slide, please. Yes. Okay. So in terms of DPU, second half, it's managed to achieve the same level as last year $0.0602 and this brings our total DPU to 12.04 to marginally lower than last year, but we are still being able to achieve above a DPU of both $0.12 and I think we have been doing so with the exception of the 2020 pandemic period. So we continue to be able to deliver a strong set of financial results. Okay. And this is where we look into more details on the operational perspective. What I'd like to say is, firstly, our occupancy rate remains very, very healthy at over 99%, 99.7%. We've been achieving 99.9% and 99.8%. Again, this is a testament of the demand that we are seeing from the market, right? The demand across our portfolio has been very strong, continue to see very close to full occupancy. And in some instances, some malls are actually at full occupancy. That actually flows down to the sales performance as well. So for the full year 2024, we managed to achieve 1.2% growth in our sales probably you would have a sale for the market, there's been some softening in sales overall, but from our portfolio, we are still able to achieve a 1.2% increase in sales, not forgetting that we actually had a pretty high base in the last couple of years. And if we take this set of numbers, you compare it back to 2019, we actually achieved a sales growth of about 20%. So we have been able to continue to drive a very positive trajectory from the sales perspective. In terms of shopper traffic, continuing to inch up 4.2% year-on-year. So we are probably about slightly about 10% of the pre-pandemic period. So again, a small people return to work, different arrangements put in place, but we are continuing to see this inching up 4.2%. Rental reversion, again, something very strong for this year. We have achieved about 4.2% in 2022. Last year, we did 4.7%. And this year, we achieved 7.7%. And over and above that Pauline is going to share a bit later on is that we are still at occupancy costs of about 16%. So very healthy occupancy costs, very strong demand and strong occupancy rate sales are still holding up traffic returning and reversion in very strong, right? So all the operating metrics, the performance is very robust for us hopefully. Leverage, not much change currently ends at 38.5% gearing level. And our cost of debt has been flattish at 4.1%. The height of what we have seen so far is first Q 2024, there's 4.3%. But I think probably since then, rates have come down, and so we are now at 4.1%. Okay. This is kind of a snapshot of what we have done this year. Again, we've done a lot of work around investment, around divestment and also in the ESG front. So we kick out the year in October with the completion of our sale in Changi City Point. And then we follow up by the announcement of our acquisition of the remaining 34.5% stake in next January, which was completed in March, and our AUM has since grown to $7.1 billion. At the same time, we also joined the [Indiscernible] index in March. Again, that gave us a wider perspective, a wider audience from the investor front. So that has helped also in terms of our volume for trading for SET. We also announced the completion of our AEI companies 1 and later on, Pauline will go into a little bit of detail. We are very happy with the outcome of the AEI works and the tenants that we've been able to bring in and also the response from the shoppers in the company's areas. So we have been getting very good positive response and also on the tenants itself. Separately, at the ESG front, again, we have done quite extensive work around that area. In January, we rolled out the first of its kind food waste valorisation at 5 o'clock malls. Again, this is something that it not only help us in terms of our ESG journey, but it's also -- there are also cost savings components to that, probably also done is in April, we announced the launch of the marking on the works to provide developments across 6 o'clock malls, SET portfolio. So a lot of things have happened. We continue to work on growing our portfolio, we constitute our portfolio and also not forgetting our journey in the ESG front. Okay. Overall market perspective, I mean, you guys are probably aware of all these numbers. I'm not going to go into much detail, but safe to say that Singapore economy continues to grow between 2% to 3%, that's the latest that we have. But also importantly, looking at the inflation numbers, it seems to have stabilized and the projection is between 2.5% to 3.5%. And that is on the back of also effect that GST is now at 9%. So if you split that out, the overall CPI would come in between 1.5%, 2.5%. So that kind of will help on whether from the cost perspective for us, cost perspective for the retailers as well. From retail sales, the wider market, you see some softening, as I mentioned just now. So on a bullet point, too, what we have put together, if you look at from January to August for the retail sales index because they are typically only announced a result 1 month after, so the latest numbers we have is up to August. So from Jan to August 2024, overall, there has been a drop of 0.6% year-on-year. So what we did is we also map out the same period for our SET sales numbers from the same period in January to August 2024. We actually saw a 1.9% increase. So we are outperforming the water market. The figure that I shared earlier on at 1.2 is for our full year financial period from 1st October to 30th of September. So it's a different period. In terms of rent, you can see in the second bullet point there from the suburban prime retail rents again continued positive trajectory, 2.1% year-on-year and 0.5% quarter-on-quarter. So it's a different measurement, when look at the prime retail space, we have a basket of transactions that happened. But from our perspective, if you look at our reversion, as mentioned, there's now be able to achieve a 7.7% reversion plus our portfolio. Supply continued to be muted. If you look at for the rest of 2024, all the way out to 2027, you are probably looking at slightly over 1 million square feet of NLA for $1.1 million. And this is spread out all across the island. There are lot smaller ones, part of the development without much of a significant size with the exception of Congo digital district, even then that is not really as what you will say, a mall per se is pretty well spread out -- small and linear type of shopping place in the Congo digital district, but overall remains to be muted slightly over 1 million square feet of NLA. Next we are going to look at the financial highlights, I will pass on to Annie to share with you the numbers. Annie, please?

Thank you, Richard. Good morning, everyone. Let me take you through the financial highlights. For the second half results, gross revenue is 2.5% lower as compared to corresponding period last year. This was due to the essence of revenue contribution from Changi City Point, which was divested on 31st of October 2023. Excluding Changi City Point and Tampines 1, which underwent the EEI during the year, gross revenue is 4.1% higher mainly due to the highest physical occupancy and higher rents across most malls. For property expenses, it is 6.9% lower due to the divestment of CCP, excluding the effect of the Changi City Point in T1, it is about 2.1% higher due to the higher utilities, higher property tax, which is offset by the lower maintenance expenses. This translates to a lower NPI of 0.6%. Distribution from investments related to the distributions from joint venture, which holds the Waterway point as well as the next. It is 34.5% higher due to the 6 months contribution from the additional 24.5% interest in the next, which was completed in March 2024 this year. For DPU for this second half, it remained unchanged at around $0.062. Next slide, please. On a full year basis, gross revenue is lower by 4.9%, mainly due to the divestment of Changi City Point and T1, which underwent EEI. Excluding the effect of both factors, gross revenue is mainly due to the higher rental income from new and renewal leases as well as the higher turnover rents. As for the property expenses, it is lower by 5.6% due to the divestment, excluding the CCP and T1, it is higher by 3.8%, mainly due to the higher utilities costs as well as the higher property tax arising from the higher annual value. NPI is 4.6% lower than last year, but it is 3.4% higher if you exclude the effect of both CCP as well as T1. We recorded higher distribution from investment in 2024 by 29.3%, which actually mitigated the impact from the divestment of CCP during the year. With the 2 half DPU of $0.062, this brings us to a total DPU of $0.124 in the financial year. Okay, next slide, please. Yes. The net asset value has decreased by $0.03 to $0.0229 as at 30th September 2024. Next slide. We continue to report healthy financial position with a stable average cost of debt. As at 30th September, the aggregate leverage is at 38.5%, which is 0.6 percentage points over the last quarter. The ICR is healthy at 3.41x, which has improved compared to last quarter. This is mainly due to the Q1 contribution with the completion of the AEI as well as a decrease in the borrowing cost from a lower loan content during this period. Cost of debt remained low at 4.1% and 71.4% of our debt has been hedged to fixed rate. Total undrawn facilities as at year-end is about $786 million, and our credit rating remained unchanged at BBB stable and BAA2 stable for S&P and Moody's, respectively. Next slide, please. We have a well-spread debt maturity profile, as can be seen from the chart. I'm pleased to inform that we have no refinancing raised this year as we have really secured all the facilities that are needed to refinance all this during 2025. Moving the debt maturity profile further to FY 2030. Next slide, please. We have a stable appraised portfolio value as compared to last financial year. The aggregate appraised value of total portfolio, including 50% of NEX and Waterway point, increased by about 1.2%. This is mainly due to the higher appraised value from the completion of T1 AEI and improved rents in NEX. The capitalization rates adopted by the values remain unchanged as compared to last year. Next slide. For DPU, $0.062 for the second half, it will be paid on the 29th of November 2024. I will now hand over to Pauline, who will take you through the portfolio highlights in the next section. Thank you.

Thank you, Annie. Hi, everyone. It's great to connect with everyone again this quarter. And like what Richard had alluded to in his earlier presentation, we do have a good set of results per share. On this slide, you see the committed occupancy still remaining very robust at 99.7%. And in terms of the high occupancy that has been achieved, it actually is across the portfolio. So each of the respective loans have contributed to this very, very good level of committed occupancy, right? And I wanted to also highlight for company's one. We have ended the AEI or concluded the AEI on a very good note with 100% committed occupancy level. Next slide, please. In revenue and NPI. Again, we see that broad-based performance improvement across our portfolio. And this strengthened financial performance is driven by both top line growth as well as savings optimization of OpEx. And this is very much true a lot of discipline and focus on ensuring that our OpEx is at a manageable level despite the inflationary headwinds that we are all facing. Next slide, please. I can't go into a lot because I think Richard spoke at length on the footfall as well as the sales growth. So he mentioned earlier that in terms of the sales, we have actually outperformed the broader market, and that is largely attributed to the fact that we -- our positioning is very much in the everyday lifestyle convenience and so forth. So that has accorded us with resilience in terms of our sales performance, right? And also the other reason for the strong performance, I would attribute it to our focus on refreshing our offering. This is to ensure that what we are, but for how we are performing is sustainable. We continue to meet the needs of the shoppers. And also, we continue to drive the footfall to our malls. And also true targeted marketing that I will speak about in my subsequent slide. Okay. Reversion, 7.7%. So on a year-on-year basis, our rental reversion has stepped up by 3 percentage points, which is a commendable outcome. And that is across 31% of our portfolio NLA. Next slide, please. Okay. Effective occupancy cost at 16%, a very healthy and sustainable level. It gives us the headroom for further organic growth as the leases come up. And this strong trading performance of our malls as well as the high space productivity, as seen in this very strong occupancy cost of 16%, it actually enables us to then in turn bring popular concepts and brands to excite our shoppers, right. Next slide, please. Okay, our focus on refreshing our trade mix remains. So over the course of FY '24, we had brought in 114 new 2 portfolio tenancies. And I think in a way this is testament to the fact that the Singapore retail seems still remains very vibrant. We have both local as well as overseas retailers coming into the Singapore market. And the fact that our malls are suburban prime spaces, we are able to actually bring in these new concepts to -- for our shoppers, right? And also I'd like to note that this is actually a good mix of not just F&B, but also non-F&B trades, including beauty and health care as well as fashion. The other interesting observation that we have is that there are also brands that are coming across the borders from Malaysia. And this is testament to the retailers' confidence. These retailers confidence in the Singapore market. Next slide please. All right. So we -- our belief is that our malls are actually the community landscape landmarks for their respective catchment. So place making engagement of shoppers is an important focus for us. As we continue our focus to drive our shoppers back to the malls and to cultivate shopper loyalty. So this engagement with our shoppers enables us to understand what their retail needs are and then, in turn, sharpen our offering to cater to the needs. All right. And we are positioning our malls as an essential part of the Heartland live and play. Next slide, please. All right. Just some illustration. We do have signature events for various malls across our portfolio. And this is some differences to cater or to tailor to the slightly different demographics of each catchment. Next slide, please. All right. For companies on AEI, I think I mentioned earlier that we have ended on a good note -- on a high note with that 100% committed occupancy. We have achieved both the retail as well as the financial objectives that we set ourselves out when we embarked on this AEI 16 months ago. So in terms of valuation gains over the course of the 2 years, we have actually more than delivered the cost that was invested in this AEI. The ROI target when we first embarked on it, we set ourselves a target of 7-ish percent, and we are -- we have outperformed this target, right? On the retail positioning front, this AI has enabled us to sharpen the positioning of companies on within the company's hub cluster. So it's differentiated. It has a refreshed offering, and it's also unique, right? So we brought 68 new to more concepts, of which 46 are actually new to our portfolio. Next slide, please. All right, this was the relaunch celebration that we had on the 12th of October. It was well attended. It was a celebration that we had with our retailers as well as the company's shoppers. Next slide, please. All right. So with this, I'll hand over to Fung Leng to take us through the next segment of the presentation. Thank you.

Thank you, Pauline. I'll now cover the next few slides on the ESG update of the 3 projects that were completed. First of all, we have -- as Richard has mentioned, we announced the rollout of the solarization project for 6 of our malls early this year in April. We have since completed the installation of all the panels on. You can see the names of the 6 malls in the first bullet. So while this is not designed to replace the energy consumption, it's meant to supplement the powering of the equipment of the malls, such as parks and corridor lights. So you can see we have some savings in terms of the energy costs as well as the reduction of the carbon emission on a yearly basis. So what you can see there are some of the pictures of the solar panels on the roof of the malls that we have mentioned. And the other great news is as for GRESB, this is a benchmark for all the group real estate in terms of the ESG journey, and we are pleased to announce that we have achieved yet another 5-star rating for the fourth consecutive year. Since we have participated in 2020, we have both on strength to strength. And this is the fulfill of achieving the highest rating of GRESB assessment. And we have also achieved very good score for GRESB score, we can see it's 91 over 100. And with full score on management score as well as our performance score highlighted in the box. So besides the decarbonization as well as the sustainability journey, we are also going to quite intensive on the S part of the ESG which a social and doing the community's management to promote inclusivity and -- for the experience of our members of the community with different needs. So you can see that some of the things that we have implemented in the malls include the dementia go to points. This will help some of the -- our shoppers with the needs as a safe harbor for in case they get lost. So their family members can find and designate dementia go to points within the malls. And also the other part of it is the [Indiscernible] forward. This is our annual journey event that promotes family bonding. And we also used the event, making event to raise some funds that goes to the benefit of [Indiscernible] in Singapore in support of the programs for persons with disabilities. So I'll hand this back to Richard to take us through the what's coming ahead for SET and -- Richard, please?

Yes. Okay. So first and foremost, we are happy to announce that we are embarking on another AEI this time around is an outcome, where we are looking to spend about $51 million and expecting a ROI about 7% return on this investment. So for those of you who are familiar with Hougang mall. This mall has been there -- has been around for about 25 years. We haven't done any significantly [indiscernible] for the longest time. So it's very timely. We have seen that the pension market has grown, that is also kind of a different profile of shoppers that's coming around this area. So it's very timely. And what we're going to do, not things we're going to expand the CSFS space to about 27,000 square feet. We're going to be also be able to, in a way, free up some higher value area so that we can convert them into our retail space. We're going to also expand our ground floor space to provide for not only an increased proportion of SMB, but also looking at potentially a longer trading hours and so on. So in terms of some of the key highlights that we are looking at for the small as we cite in other physical attributes, we are also going to increase the proportion of F&B from current 26% to 32% because the demand for -- similarly, like what we're experiencing in our other malls demand for F&B trade is very strong, both from shopper's perspective and also from the retail perspective. So we are expecting to commence this AEI sometime in the second quarter calendar even not on financial year calendar year 2025, and to complete some time in the third quarter calendar year in 2026, right? So again, we are very excited to embark on this because we have seen the results coming from what we have done at Tampines 1. So sometimes, when we look at it from AEI perspective, it seems to be -- may not be that significant. But if you look at it in total, this is $51 million. We just spent $38 million. It's almost $90 million, right? If you are investing $90 million, and you're getting the return between 7% to 8%, actually, there's a very good return compared to what you have gotten acquiring and other assets. So do not discard AEI. It may not be as big as large as significant as what you imagine for real estate. But once you put all this together, not only are you getting pretty good, very good return actually, and also there's an enhancement to the value of our assets. So overall, I think we are very excited as what we shared before that we have plans to roll out our AEI when we complete one, we will then [Indiscernible] another one. And hopefully, we look forward to this, getting the same results, same traction. It's what we are getting at Tampines 1. So for those of you who have not seen it, I suggest maybe can make a trip down to Tampines 1 to look at the new spaces, the new brands and the vibrancy that has been created for that mall. There's another area of focus for us when we are looking forward itself. Also like to share next slide is funding. It's about all the developments that we are expecting to come in the northern part of Singapore. A lot of conversations, discussion, highlights have been surrounding the development on the completion, the upcoming RTS, but what I would like to say is RTS is but 1 development that's happening in the North region. There are so many developments that's coming on stream and not forgetting that Woodlands is the third regional center in Singapore. So if you take the queue from what we have seen over time, Tampines being the first region of center, how successful it's been, what kind of development that came up what kind of vibrancy and support structure that is provided infrastructure support development and housing and so on. And the results that you could see that's the reason why we get our performance of our malls they're like Tampines 1 is doing very well. Similarly, [indiscernible] District was the second regional center again, massive development, housing there are being snapped up. The price of housing has kept going up. Over there in [indiscernible] east area, you have currently 3 significant loss that's close to about 1.4 million square feet of space, but the demand continues to be very strong and a lot of developments coming up. So likewise, for the North region, I think beyond just looking at RTS as there's 1 development there. There are so many things that's happening. So we thought maybe it's timely for us to associate because we're actually quite excited with all these developments because there are actually a lot of opportunities for our malls in the Northern region. So if you look at some of this information we have put together. Firstly, I want to focus on the growth in the catchment market. So in Woodland's perspective, firstly, there's going to be another 10,000 new phones over the next 5 years. Of course, recently, the private condo, not there was launch. I mean it was overwhelming, right? I mean firstly, the demand was strong, the pricing was very good. And again, we will expect it's more development coming up or more private development comes up where we'll have a similar kind of interest because -- for those who are familiar or know what's going to happen in the region, they will probably be able to prevent and expect what they do see in the company's area in [Indiscernible] Lakeside area, and that's the same thing that's going to happen in the northern side of Singapore and [indiscernible]. So, 10,000 in a short term over the next 5 years, and as we were preparing this debt of it's mention, again, the government announced 2 days ago, further expansion of development in the northern region in north coast -- Woodlands north coast of course in [Indiscernible] north. Another 14,000 new homes that's going to come on stream. Of course, maybe this is slightly middle- to longer-term period. But if you put this 14,000, 10,000 homes together between 4,000 new homes, if you take an average of 3% per household, we are expecting quite a significant growth in the population over time in the Northern region. So today, it's about 255,000 catchment market. So this -- these 24,000 new homes is going to provide an additional close to 13% growth in the total catchment market. And today, in that area, there's only 1 Causeway point, that's 400, 1,000 square feet. We don't have 1.4 million square feet. So again, we look at perspective, right? RTS is part 1 development, but there's so much that's going to happen around this area. So from a catchment market perspective and then also what is going to happen around the area is for 100 hectares of land will be developed into commercial hub industrial developments, R&D facilities and so on. So this is going to be the largest economic cap in the northern parts of Singapore. And coupled with that, the focus on the ecotourism you know that partnership. So all our ecotourism are concentrated again on another part of Singapore. And the last point that I have here is recently again another major development that comes in that location, Woodland's Health Campus, a 1,000-bed community hospital with another 400 beds for long-term care plus all the specialist cleanings as well. So again, another very major developments. So whatever an area is identified as a regional center, you expect a lot of investment in infrastructure a lot of developments in terms of homes and also the business hub and so on. So massive opportunities as far as we are concerned. Next slide, please Fung Leng. So this is where we spoke about the IT tech and food corridor. Again, this is something that would also benefit the northern region, stretching from [Indiscernible] all the way to Sinoku, right? The middle chart that's actually showing the business part, the industrial development that we spoke about also the 4,000 new homes in the north coast area. That's one stop will be from cost from our cost more. So massive development similarly in the last matter you could see is in terms of the ecotourism that spoke about the whole [Indiscernible] area has been developed significantly with the inclusion of the bird paradise and so on and also a eco tourism development there. And I've also not included actually the numbers about the development that's going to happen around Singapore Sembawang area. So I got to say, a lot of very exciting development. That is going to continue to increase the overall catchment markets in northern regions for our malls like [Indiscernible] and [Indiscernible]. And incidentally, if we go to and focus now on the issue here, over the next slide, please Fung Leng. And you see a similar kind of development that's going to happen there, maybe slightly on slightly smaller scale, not as expensive as what you were seeing in the Woodland's area. But nonetheless, it's also very significant because firstly, we are expecting another 8,000-plus new homes in the near future between 2024 to 2029 and also a slightly longer-term period. The development of the area what is in -- Chencharu area. That's going to create about 10,000 new homes for 2040. So again, this is 1 stop away from Northpoint City. Northpoint City as a whole, it's over 500,000 square feet. Significant retail mall that's going to benefit from this increase in catchment market. Of course, it's not complete if we don't talk about RTS. So the RTS development is going to expect to compete in 2020 sales. And this is a map of where RTS station is going to be viz a viz where our malls are going to be. So another point of interest that may have been overlooked when we talk about this development is the fact that Causeway point, the MRT station that is thoroughly connected to Causeway point, the Woodlands MRT station is an interchange station between the north-south line as well as the key line. So you can expect that this station is going to be very busy because people are coming from the North-South line, they want to change the -- they're going to transit Woodland's MRT station vice versa, right. So again, we expect to see to get additional transient customers that may not be residing in Woodland's area to come to this area, whether it for -- wanted they want to take the RTS, whether they want to take RTS, whether they need to change the train or whether they are coming here for the new medical campus, all the new development that's going to happen in terms of the business with the working people, working population, and so on. So we do see this as the key driver. In fact, the positive driver for our malls in this area, and that also allows us then to look at how can we enhance our retail offerings, whether it be FMB, whether it be specialty retail, given the fact that the profile of the catchment market is going to not only increase, but also potentially could change because there are other components that's coming on. So this is where we feel that there's a lot of opportunity for us then to review our techniques and ride on a leverage on all these future developments that's going to happen in that area. And as Pauline mentioned, that it's also something very interesting that we have been observing is the fact that we have anything actually more and more retailers from Malaysia coming to Singapore, to set up shops in Singapore. So in her pictures, just now she showed beauty that is the [Indiscernible] concept is from Malaysia, [indiscernible] another concept is from Malaysia. Our [indiscernible] is going to be opening up shops in Singapore. So the question is then if we think that it's going to be so much impact with RTS, why would retailers from Malaysia once, want to come to Singapore and set up stores. I mean, fundamentally, it's because they believe that the market in Singapore will continue to thrive and do well so they want to have both represented both in Singapore and also in a home based in Malaysia. So this is where we thought we wanted to share from a wider perspective, not to over look at all the major developments that's going to come on stream. And as I said, our team are very excited about working through some of these numbers and planning our sales for with all these future developments to come on stream. Okay. Maybe just a wrap up before we move to Q&A. So again, strong sets of results that we are delivering over $0.12 in terms of DPU, completion of companies 1, AEI and also the completion of our transaction for the remaining 24.5% staking next kind of would lay the foundation going forward. This year, we did not benefit from the full contribution from these 2 upon the acquisition and also the AEI, so next year, we should see the benefit in the contribution. Again, very excited to roll out our next AEI and [Indiscernible] and this is something that we get based on what we have seen at Tampines 1, we would like to also take the opportunity to revamp the mall, get the upside and also provide new features and enhance the retail experience for our shoppers in that area. We continue to work very hard from the asset management perspective, the property management perspective. We continue to look at our organic growth within our existing portfolio and at the same time, having a mindset in terms of our continuous journey in our ESG front, as that's what we shared today. So again, efforts will be put into place to continue this trajectory. And the final point is we continue to be positive in our outlook on Singapore's brands have been retail based on the metrics that we have shared, very strong demand, that gives us a very high occupancy rate. Our OP costs continue to be very stable, healthy at 16%. Our reversion was at 7.7%. So all this points to the fact that prime Singapore retail continue to do well, right. With that, I'll end my presentation, and thank you very much.

[Operator instructions] Starting with Geraldine from DBS.

Excellent set of results and very exciting development for Woodland's to come yes, hopefully see some tourists. Okay. My first question on reversions. I think Causeway point delivered quite a positive surprise at 9% reversion, Are we able to share if this is a good gauge for future quarters as well.

I'll chip in first and then Pauline if you have got anything to add. I think, again, maybe just now we wanted to highlight this point as well. And thanks for bringing it up. Causeway Point, 8.8% and then enough points [indiscernible] almost 7%. These are malls located on the northern Singapore. Occupancy very high, reversion, very strong. I mean are we missing something or the retailers are missing something because they know that they continue to try and do well in this month despite the fact that there's a lot of noise around RTS and so on because probably they've seen all the development is coming on stream. So if you ask me very strong set of results, of course, year-on-year, it could be a different composition. Certain yes, we have different traits that is up for renewal and sometimes a little trade, gives us a better uplift, but I would rather look at it from an overall perspective that as a portfolio, I think the 7.7% growth was -- it was in fact pretty strong numbers that we have. We will continue to work very hard in our next cycle of renewals, and we hope to be able to then get the same level of reversions for next year. Pauline, anything you want to add?

Fung Leng, could you bring us back to slide 23, please?

Okay. Give me a second. Let me look at this.

So Geraldine, I wanted to emphasize the fact that -- so your question is whether this strong reversion is sustainable. I think if we look back at what has been achieved for FY '24 is of a significant base, right? We're looking at 42% of the most NLA. 88 leases, right, to contribute to this 8.8% rental reversion. And I think this -- the number speaks for itself, right? It's not just coming -- the strong reversion is just not coming off a small base. It's across the mall. And we do see that it is from various traits, right, not F&B, some of the retail trades as well. The other point to note is that for Causeway point, there's a lot of focus and emphasis on refreshing the trade mix. So some of these are actually coming from new offerings. So that is, again, the testament to the fact that there is a very strong conviction in the Woodlands catchment area. All right. So I hope I've provided a little bit more perspective on this.

Yes. Thanks Pauline. So new offerings, are you more biased towards certain trade sectors? You see more longevity in certain trade sectors?

Not from the positioning. Well, I think we do take a very hard look at how we can differentiate ourselves because Causeway point is actually quite close to the border, right? But at the end of the day, the focus is still catering to the immediate catchment right? It's everyday convenience, the lifestyle needs of the heartlands and so forth. So that is where we feel that in terms of moving the positioning of Causeway point, that is where we should be working towards, continue to be relevant to the immediate catchment but then also have an eye on what are some of the new opportunities and new developments in the catchment, right? So that -- I hope I've answered your question.

We need to be there ourselves to see that Causeway Point.

I understand some of you will need to drop off at 10:30 for another call. So we try to move faster. Second question from Terence, JP Morgan. Please go ahead.

Fung Leng. Richard. Just 2 quick questions from me. Could I get an outlook on interest rates year-to-date, it's trending down [indiscernible] still flattish at 4.1%. So what's the outlook for next year? And then second question I wanted to ask on the both the fees and units and most of the distribution from SET sigma. How much is left? And what's [Indiscernible] SET sigma.

Yes, I'll take the question. Yes. The cost of borrowing income is likely to be in the low fall based on the outlook now.

So is that slightly above or slightly below the 4.1%.

It is around the same region, in the fall region, low fall region. Okay. The second question is on the NAV units, right?

Yes, fees and management fees and units and also SET sigma.

The NAV units for this on a full year basis is about 70%. We have taken 70% in units that is to take into account the loss of income from the T1 AEI.

And going forward, should we be expecting [Indiscernible] given that the [Indiscernible].

We will review the NAV in units in conjunction with the income loss from the outcome on an ongoing basis.

Terence, it may not be the same because, again, depending on the disruption, right, usually, the disruption is spread out. So it depends on that which point in time. So if there's a higher area disruption that impacts the income, then we will use a higher proportion of E&Ps to cover that. So in fact, is what we are saying is that the impact from the AEI will be covered by E&Ps. That's how we work in order to maintain the performance of the [indiscernible] so that investors would not [Indiscernible] during the AEI has been carried out. But at the same time, they benefit once the AEI is completed.

Terence, just to add on to that, right? So when we actually carry out the AEI, we are very cognizant of the disruption and the continuity in the trading of the mall. So the AEI, like what was done for Tampines 1 is actually phased out. So that staging is something that we look at very closely. The timing of the works on which part of the mall is also another area that we look at in order to minimize the disruption.

Great. And SET [Indiscernible].

Yes for Sigma, I think we're still in the process of liquidating the entities in the ARF portfolio. So the amount of the Sigma balance is still subject to change.

Okay. Sorry, if I could slip 1 more in reversions. Will it come in the cash flow, will it come in immediately? Or does it like flow through in about like 6 months candid income.

The reversions for those will be leases that has really been committed. It depends on when these leases were committed. Some of them would have been done, maybe in the early part of the year. Some is as close as maybe 2 months ago. So it depends on when orders came into force, right? But by and large, it's just an average across the whole year and across all the leases that will renew or new leases that were brought in.

On this door, the stronger reversion actually builds the revenue base because if you recall, most of our leases, we also have that step up. So that's also going. So it's growing off a higher base, literally in that sense.

All right. Thank you. Moving on to the third question from Rachel with Macquarie.

Few questions from me. I think for -- on your Hougang AEI, how much downtime do you expect during this AEI? I mean I see some of the Hougang has quite a large proportion of the lease expiring next year. So if you could give us some color. And also, I think you probably already have some tenants being signed for the Hougang AEI space like cafe Bonito and all, what's the precommitment level at the moment now?

Okay. Again, I'll give you some perspective and then Poly can add on. Okay. So by and large, the impact to the mall, it's about 40-ish percent in terms of the overall NLA, but Pauline mentioned. It will be done in stages, right? It's about -- the whole mall will continue to be in operation, and then we will embark on different phases to minimize the overall impact, but by and large, it's about 40% of the entire model will be affected. So back in Tampines 1 is about 30%, right? So it's very hard to say exactly at which point in time, how much would be affected. But the assurance is that we will progressively do areas where there's minimal impact. And then before we move to another area, right so the overall impact to the not just the financial impact, but we are also very mindful in terms of operation. We want to make sure that our existing tenants continue to trade our shoppers can still continue to come to the mall and shop the necessities and also carry on with the requirement for SMB and so on. In terms of tenants, we are working very closely with several tenants. We can't review the names as of yet because I think a lot of them are in very advanced negotiation. So this will be shared in subsequent quarters as we start getting closer to the time when we start the AEI.

Yes. So Richard, add on to address the question on the commitment levels. In terms of the staging of the AEI, we are looking at the first space that is affected coming back towards the end of the year. The other thing that we are very, very careful on is I think in terms of AEI, it's not just about physical changes, about physical upgrading. We are also very focused on the brands that we bring in the kind of trade mix we want to calibrate after the AEI, right? So you are right that engagement has started. I think to date, we have interest from more than 50% of the spaces that is affected by AEI. But before we actually lock in some of these leases, we want to actually ensure that the holistic outcome is achieved, right? And there is still quite a fair bit of time before that first phase comes in. But to date, we have already achieved more than 50% interest.

And then the next question is on. Just a quick 1 on debt. Can I assume that all your debt has already been repriced to current levels?

For those that is still on floating, it will be based on floating because we have 71% of the debt that is hedged. So when we do the refinancing, we will monitor and progressively put in place the interest as well.

So what I mean is that currently, your debt and swaps are all already at the current market levels. So there's no low rates [indiscernible].

Yes.

Okay. Good. And 1 last one, in terms of acquisitions, what are your thoughts? I mean, you have quite a [steady] footprint in the Singapore retail space. Do you still see room for you to expand in Singapore? Or do you will be looking at somewhere else aside from Singapore.

Sorry, honestly, my own view is that there are still opportunities in Singapore, and we are continuing to focus in the Singapore market, at least in the immediate future.

Next question from Darren Chan, Morgan Stanley.

Just 2 quick questions on the management fees and units, I guess is it fair to say that we see this as kind of a balancing figure to maintain a [indiscernible] DPU, especially in line with the disruption from AEI.

It's not so much as to maintain the [Indiscernible], but the whole idea of the AMC is to cover the extent of the impact, financial impact on the AEI. So whether at the end of the day, it still comes back to $0.12 or not, it's a separate method. But more importantly, let's say, for example, I would tactically $1 million it's on the NBI basis is disrupted because of the AEI, and then you'll hedge back when we [indiscernible], makes back to what charles said, whether it makes that the child sets. Hopefully, but it may or may not, right. It depends, the [Indiscernible] depends on many other issues with regards to the performance of the other malls and so on.

Sure. But effectively the downtime of the Hougang AEI is almost irrelevant in sense because you're using -- you're going to use the management fees to offset that impact. So it doesn't really matter financially speaking.

That's right. Right.

And second last question is on the NEX [indiscernible]. Any update on that yet?

No update. I think that's the short answer because, as we mentioned before. This is something that requires unanimous decision by all parties in the joint venture. So there's no further development from the last time that we met.

Next question is from HSBC.

Maybe just 2 questions from me. Firstly, on White sands. I just wanted to get an update because Richard, I recall you said previously that the initial impact from the opening of PRM was positive. So I wanted to see if you are still seeing the trend being positive for now. Second question for the rent reversions, they are very strong. But we do see the tenant sales -- the growth in the tenant sales slipping quite a bit. So how confident would you be in terms of maintaining the reversions going to the next FY.

All right. Firstly, White sands, I think what we have seen so far because they opened in [period] in June period, right?. So they have had a lot of using a new malls opened, you have a lot of publicity, a lot of campaign, a lot of promotions to attract people. And then again, being a new kid on the block, you expect a lot of people once to go there and experience and see and so on, right? So -- but we are happy to say that the impact on the traffic is actually pretty minimal, right? So that goes to show that as what we spoke about before that having another 260,000 sqaure feet of sold space actually makes this area more attractive so that [indiscernible] can then come to 1 area to shop right instead of White sands only had 50,000 square feet and then you head down east, so it's spread out, right? But today what we're seeing is more people would then come to the central area for shopping because you have more than 40,000 square feet of retail space and offering that's available. In terms of sales, we are still monitoring because like what I say, I think, is not stabilized because there's been so much happening over the last 3 months or so. So this is something that we are continuing to watch, we continue to fine-tune our offerings and so on. And also our own campaign that we're going to roll out because there's no point we're having a campaign. We must have our campaign. So this is something that we continue to monitor and maybe we can give more details and sharing it in subsequent quarters because now it's just too early. Your second question is on tenant sales. Yes, the number doesn't look as interesting as what we've been sharing for the last year or so. But again, don't forget that we are coming off a very high base. Despite that, we are still growing at 1.2%. And as we compare just now, if we take a similar time frame of 1st January to August, we compare to the wider market. We're actually 1.9% up. This is the wider market of 0.6% down. So from our perspective, the sales is still due [holding up] well. And more importantly is also if you look at the occupancy cost 16%. So is that a healthy occupancy cost. And the answer is yes. So if you are a healthy occupancy cost the gives you opportunity to continue looking at positive reversion. So this is where we are very focused on. And our team will continue to work in driving sales, right? We want to at least maintain the sales trajectory that we are experiencing and enjoying.

We now have the last question from [Indiscernible].

First question is on Tampines 1. So I understand earlier you mentioned 30% of the NRE was affected by AEI, over 5 quarters. You stage it out. But if you were to think about the entire 5 quarter, how should we think about the average occupancy that we're paying rent?

Average occupancy. Will it be fair to say about 85 to 90 or I think each time it's each quarter be at the most space affected I'm talking about average, right? There are certain period maybe slightly more. But over the last few quarters, I think no more than 10% on the average.

That would be fair [indiscernible].

Okay. Second question is to follow up on the tax transparency and mix. I guess it's been a while. Can you share a bit about what are the key hurdles? Is it getting agreement from partners? Or is it regulatory bodies?

I think the first step is even before you go through regulatory bodies is getting approval from all JV partners. As we shared before, I think this is something that benefits SET. We don't really see how we don't -- we're not aware of benefits that may be attributed to the other JV partners. So it is what it is. So we need to continue our engagement with our JV partners. Talk to them an appropriate time, we hope that they will be convinced that they could come on board with this proposal to restructure the [holy] company.

And what were the kind of additional cost on the JV partners if you go through tax transparency, and does it make sense for SET to cover it and in order to get that.

Because the thing is the restructuring cost itself is not significant. I think that's something that is not going to affect much, right? It's not a significant cost, but more importantly is any potential impact that could be if they were to restructure from their own perspective from their own tax perspective. And that is something that we are not really to [Indiscernible] potential impact that be. So let me hope to continue to engage them that at some point in time, they are comfortable to share with us, then we can look at it and collectively, but in such time, we remain hopeful. We continue our conversation. But again, the focus that what i said has always been about the asset how can we continue to drive value from the asset. Reversion is strong, occupancy is 100%, how can we maximize the value? How can we look at some low hanging fruits, spaces to work on and also focus on tension on AEI. The AEI as mentioned in the last quarter, we already submitted to the regulators. And now we're getting feedback from regulators. We're getting questions from regulators, and we continue to work on that. So we want to focus on things that we think that at least within our control, and we can work on those areas.

Okay. Just 1 last question on NEX reversion. I guess, occupancy cost is still healthy, but it is higher year-on-year, right? Should we think about reversion is still positive to moderate from current level? Or do you see this [Indiscernible].

I think what we can say is that it's going to be a positive reversion, whether we can achieve 7.7% or better or lower than that. I think that's where the team will continue to work hard on that. But coming back to the 16%. To me, 16% is still a very healthy occupancy cost right? So that gives us a good perspective to start the engagement with our retailers.

All right. Thank you very much. We have come to the end of the analyst briefing this morning. And we'd like to thank everyone for your attendance this morning, and we wish you all good [indiscernible] ahead.

Thank you.