Fortune Real Estate Investment Trust (778) Q2 2023 earnings summary

Executive summary

• H1 2023 revenue rose 4.7% to HK$908.7m and net property income increased 6.0% to HK$671.9m; income available for distribution fell 2.0% to HK$447.7m.

• Interim DPU declined 3.0% to 22.36 HK cents, with a 100% payout ratio.

• Portfolio occupancy was 94.1%; valuation was HK$39.537B and NAV per unit was HK$14.39 at 30 June 2023.

Financial highlights

• Revenue rose 4.7% to HK$908.7m and NPI grew 6.0% to HK$671.9m; operating expenses increased 1.0% to HK$216.0m.

• Profit before tax and unitholder transactions was HK$366.9m versus HK$484.6m; profit for the period was HK$279.1m versus HK$389.0m.

• Income available for distribution and distributions were HK$447.7m, down 2.0%; DPU was 22.36 HK cents versus 23.05 HK cents.

• Basic earnings per unit fell to 13.97 HK cents from 19.66 HK cents.

• Revenue growth reflected stronger base rent, carpark income, charge-out income and turnover rent, and no rental rebates versus H1 2022.

Outlook and guidance

• Hong Kong’s second 2023 consumption voucher distribution and Happy Hong Kong Campaign were expected to support local spending and inbound tourism in H2.

• Rental recovery was expected to be gradual; proactive leasing and trade-mix optimization remained priorities amid uneven demand.

• ~63% of borrowings were hedged at fixed rates, expected to remain at current levels through 2023.

• After the HK$1.5B October 2023 refinancing, no further refinancing needs were expected until late 2025; +WOO Phase 2 was targeted for completion in H1 2024.