Good morning, everyone. Welcome to Frasers' first half results presentation for the first half financial year 2023. This morning, we have released our results on the SGXNet at approximately 7:35. We hope we have all got a glimpse of the announcement. We are very happy today that we have the management team, Richard, CEO, Audrey Tan, the CFO, and Ms. Pauline Lim, the Head of Investment & Asset Management with us. We will kick off with Richard starting off with the presentation, and I will hand this over to Richard now. Richard, please.
Yeah. Thanks, Fung-Leng, and a very good morning to you guys. Hopefully, like what Fung-Leng mentioned, you had a chance to take a look at our results. Let's go into the details. Fung-Leng, slide 1, please. First and foremost, I think we are very happy to announce this set of results on the back of a very challenging environment. Despite, we talk about increase in interest rate, inflationary pressures, increasing costs, et cetera. I think we have done very well in terms of financial performance, in terms of operational performance and also something that you guys are always looking at in terms of rental reversion. If you look at across all these three components, we have done very well for this first half. Moving on. Okay, so for gross revenue, there is an increase in 6.5% up to SGD 188 million.
In terms of net property income, it has also gone up by 5.7% for this first half comparing to the same period last year. Similarly, for distribution to unit holders, there is a slight increase of 0.3%. In terms of DPU, we are flat at 6.13 or marginally, if you really want to go into decimal point, it is about 0.1% lower. I would like to also stress that for this particular set of results, we are retaining SGD 3 million of tax-exempt income, which we will distribute by the end of this FY. Okay. A little bit on the broader market perspective. We have witnessed that sales continue to grow across the entire retail market. From the RSI, you can see that for the month of February, it is gone up by 11.7%.
Of course, there is a little bit of festivity around it, but even if you take the average of the two months, the growth is still quite stellar. F&B has continued to be the driving force, up by 22% on a broader market perspective. Another point to note is, if you take a look at the reports from CBRE, prime rents for both suburban and Orchard Road prime areas have continued to inch up at 2.8% year-on-year for suburban prime rents and also close to 2% for the Orchard Road prime rent. Partly, this is also a result that we spoke about before. You are seeing for the broader perspective, you are also seeing a muted supply that is coming to the market. I think this is where, again, you see demand coming in pretty strong from all sector across the retail broader market.
And also, if you look at our portfolio, we registered 99.2% occupancy, and that's a testament to how strong the demand has been for this year itself. Okay, this is a little bit of recap of what we have done into six months of this year. We have done a lot. In fact, if you look at this particular slide, we announced the acquisition of NEX on January 26, and then we completed the deal on February 6. So it was a very quick turnaround. Again, just to highlight that NEX is one of the largest suburban malls, and we are very happy to have this investment into our portfolio. It definitely strengthened across in terms of what we already have in our portfolio. NEX is also in terms of our additional acquisition into Waterway Point. So now we own 50% together with Far East.
So again, that has been a standout performer. Waterway Point has continued to deliver very strong results for us. Last but not least, also in terms of our ability to drive growth from our existing portfolio. So we announced the start of our AEI at Tampines 1, and also happy to announce that over 90% of the leases that is affected by this AEI has already been either committed or in a very advanced state of negotiation. So in terms of pre-commitment has again proven to be very strong. So, coming back to the fact that we still continue to see strong demand for good prime retail spaces across the island. So if you look at where we are today, we are now having a larger share of the Singapore suburban retail market. We are up by about to 10.5% compared to prior to the acquisition of NEX.
So this is where we are, and I think it's a very important statistic to also look at, not just for the fact that we are the largest owner today, but more importantly is the quality of assets that we have in our portfolio. The ability for us to leverage on the scale in terms of reaching out to retailers, working with retailers in terms of ability to negotiate contracts on a bulk purchase basis, and also roll out various initiatives which would have been too costly if you don't have a certain scale. Plus, of course, the ability for us to continue to grow in terms of getting our loyalty members. Today, we have about 1 million members. So we hope that we can continue to grow on this front as well.
So being the largest owner of suburban retail space certainly comes with all these various advantages that we spoke about. Okay. This is a bit of what I touched on just now. Today, we are serving a catchment population of about 2.6 million, and that's literally close to half the population we have in Singapore. So every one in two population in Singapore is somebody that we are servicing. We have a touchpoint with them. So again, this is very helpful. This will help us to continue to be able to bring in demand, bring in sales to our retailers, right? Also, the other thing to note is the quality of our assets. We spoke about it before. They are all very well connected. You have access to the transportation hub. You're very close to a very large catchment market, right?
And also our focus has always been heavy on the essentials items because that is what we do, right? We service our communities, we service our customers. We also embark on a lot of omni channel initiatives to click and collect and using our assets, our stores as a last mile fulfillment hub. This is something that we continue to embark on. We continue to work with our retailers because this is one way in which we can ensure that they will continue to drive revenue, they will continue to grow their revenue. The next section is going to be talking more on the financial highlights, and I will leave this to Audrey to take you through. Audrey, please.
Thanks, Richard. Good morning, everyone. I will run through the financials highlight. FCT has registered higher gross revenue by 6.5%. It is mainly due to the higher staggered rents and the renewal rents, and also higher atrium income, with the resumptions of atrium events from 29th of March last year. Higher property expenses is due to the higher staff costs and also marketing expenses, along with the increased activities at our mall. So this translates to a higher NPI of about 5.7%. Distributable income dipped by 9.1%, is mainly due to the higher interest expenses with the rising interest rates, and also the additional loan that was drawn down to finance the investment or acquisitions of the additional 10% in Sapphire Star Trust, which hosts Waterway Point, and also the effective stake of 25.5% in Gold Ridge Pte. Ltd., which hosts NEX, which was the most recent acquisition that we did.
Distributions from associates and joint ventures is mainly relating to our 50% stake in Sapphire Star Trust and also our 25.5% stake in GRPL, Gold Ridge Pte. Ltd. We have seen higher distributions from Hektar REIT. Distributions to unitholders, and also the DPU of 6.13 cents is comparable to last year. The distributions, the DPU, is after retention about SGD 3 million and which we will look to release in the second half. Next. The NAV is at SGD 2.32, which is comparable to 30th September 2022. Next. So this is the debt maturity profile. As at 31st of March, the aggregate leverage is up from 33.9% last reported to 39.6%.
This is mainly due to the loan that we have actually drawn down during the period to finance the additional 10% stake in Sapphire Star Trust, which holds Waterway Point and the effective 25.5% stake in GRPL, which holds NEX, which I have shared earlier. The adjusted ICR and ICR is down slightly from 4.7x to 4.39x , mainly due to the higher interest expenses with the rising interest rates. Our cost of debt is about 3.6%, and the average debt to maturity is about 1.9 years. 76% of our debts are hedged to a fixed rate interest, and close to 38% of our loans are actually from green financing. So we have undrawn RCF about SGD 850 million as at 31st March. Our credit ratings by S&P is BBB stable, and by Moody's is Baa2 stable.
I am pleased to inform that we have already secured all the financing that is required to refinance the debts that is due in FY 2023, approximately SGD 391 million. We also secured funding for the SGD 39 million for FY 2024. DPU is at 6.13 cents. The ex-date will be on 9:00 A.M. on 4th of May, and book closure date is on 5:00 P.M. of 5th of May. Payment of distributions to unitholders will be on 30th May. With this, I will hand over to Pauline, to touch on the portfolio highlights. Pauline, over to you.
Thank you, Audrey. Good morning, everyone. I am quite excited to show our results for the first half of this financial year. I think in general, the portfolio has done well, notwithstanding the fact that we just came out of a couple of challenging years due to the pandemic disruption. We believe that the strong fundamentals in our portfolio will then position us for further growth going forward. Just to set the basis, as you are aware, we have a new addition to our portfolio, which is NEX. The transaction was completed with effect from 6 February this year. The set of results that you see for the portfolio performance indicators, we have actually included NEX in the reporting. But the discrete or specific KPIs is not reported due to confidentiality because this is a JV arrangement with other investors. With that, I will move on to occupancy.
For portfolio occupancy. Sorry, Fung-Leng, can you go back one? Okay. We have actually hit a high of 99.2% ending this first half of this financial year. I think this is an occupancy level that was not seen at least over the past 2-3 years of pandemic period. In terms of the occupancy across the malls, if we actually look at the individual malls, in terms of occupancy for the respective malls, it is also at a very respectable level. For our dominant malls, it is close to full occupancy. We have also seen good improvements in certain assets. Case in point would be Century Square, whereby you see the pickup by 8% point on a quarter-to-quarter basis. This is largely due to the fact that we have secured the lease for the anchor cinema space. Next slide, please, Fung-Leng.
This is income performance. I think higher revenue and NPI across our entire portfolio, and in fact, we see it is actually the trend for the individual malls as well. On an overall portfolio basis for revenue and NPI, we have seen a 6% year-on-year increase. As mentioned earlier, this is largely driven by the top-line improvements in rents as well as in atrium income. That is notwithstanding the fact that we do see inflationary pressures creeping in. Notwithstanding that, our NPI margins actually maintain at a very strong level. Next slide, please, Fung-Leng. Portfolio sales, tenant sales, and shopper traffic. We see in terms of both parameters, the recovery has actually sustained since the worst of the pandemic period. We see the improvements happening over last year, and it continues into this financial year as well.
That is something that bodes well for retail, and it is largely reflective of the fact that our portfolio has a very strong essential positioning, and that has given it its resilience, notwithstanding the disruptions in the broader market. Next slide, please, Fung-Leng. For rental reversion, happy to report that reversion, we ended the first half of this financial year at close to 2% on an incoming versus outgoing basis, 4.3% on an average versus average basis. It reflects, I think there are a couple of takeaways from this performance. First being that reversion has been picking up. If you recall, for the FY 2022, we ended at about 1.5%. We do see reversion improving. Also with the very good 4.3% average against average, there is also a healthy step-up that is embedded in the new leases. Next slide, please, Fung-Leng.
In terms of lease expiry profile, we do not see any significant concentration in the medium term, in the years going out, well maintained at a healthy level of close to two years by both NLA and GRI. It mirrors the fact that the tenor of our leases is about three years. The other thing to highlight is that for FY 2023, the stock of spaces that we need to work on in terms of new leasing or renewals stands at about 11%. If you recall, we started the year at about 30-over percent. Midway through the year, we have already de-risked about two-thirds of the leases. That is also an indicator of good leasing traction. Next slide, please. This is a deep dive into the respective assets. I will not go into the details for this. Next slide, please.
Just to share some of the new brands or new leases that we are bringing to our portfolio. I think notwithstanding, even during the pandemic period, the past 2- 3 years, we have actually not lost focus on refreshing the retail offering, such that we can actually sustain the retail performance of our assets. This continues. We are bringing in some new exciting brands across our portfolio. It cuts across the various sectors, not just F&B, the various other retail sectors as well. For Changi City Point, we are very happy and excited to announce that we will be bringing in Coach. I mentioned earlier the fact that we have actually committed the lease for the cinema space. We have brought in Cathay Cineplexes as our new partner, our new anchor partner for Century Square. Next slide, please, [inaudible].
Tampines 1 AEI, we announced the fact that we are commencing the AEI in the last quarter. Happy to announce that we have actually achieved a 90% pre-commitment for the spaces that is impacted by the AEI. This is quite a major AEI that will impact about 30% over of the NLA of this mall. I think it is a good achievement to shout about. I also like to draw your attention to some of the interesting brands, the good brands that we have brought into the mall to reposition the asset. In terms of the positioning for Tampines 1, it is young and trendy. Kudos to the team on the ground. I think it is a commendable result. Next slide, please. All right. With this, I will hand over to Richard to round up our presentation for today. Thank you very much.
Yeah. Thanks, Pauline. Let us do a quick round up before we move on to Q&A. As you can see that for this half itself, the performance has been very strong coming out on the back of a very challenging market, as I mentioned just now. Again, if you look at it, this is a testament of the quality of assets that we have. Five years ago, probably our size is half of what we are today. The assets that we have is also very different. The quality of assets that we have is very different. Today itself, we are looking at having the 10 malls across the island, all well-connected, well serving a very large catchment market, and that has been one of the key aspect that underpins the strong performance that we see today. Of course, that is only half the equation.
The other half is also we have also built up a very strong capabilities in terms of the team that we have today, from both asset management, property management perspective. These guys are continuing to work very hard on the ground. We all acknowledge that there are components in the market that we cannot control. We cannot control interest rates, we cannot control oil prices, but we can do to make sure that where we can control, we try to do as well as we could. This is definitely a testament to what you are seeing today, strong occupancy, good reversions, continuously driving sales for the retailers. Our sales, if you compare to pre-COVID, year to date, it is about 14% increase.
Yes, you could say that perhaps there are some inflationary component in that, but certainly I do not believe that Singapore's inflation has been up to 14%. There is still a lot of growth that has been achieved by our retailers across the board. Shopper traffic has also come back very strongly. Some of our malls are pretty close back to pre-pandemic. Overall, we may be about perhaps 15% below 2019 level, and that is a function of, again, hybrid work arrangement and so on, that we also benefit from. Overall, I think in terms of the operating performance, we are very happy to share this set of results, and we continue to work hard on that.
The other aspect is also, we have been lying pretty low for the last two or three years because of the situation, the challenging environment, the pandemic, and so on and so forth. For this year itself, we are starting to look at opportunity for growth, and we have done that very quickly, right? As mentioned just now, we have acquired 25% of NEX. We completed our transaction, another additional 10% for Waterway Point. We start our AEI, and as we speak, the team also working now on the next possibility, the next AEI that we could be looking at. So these are all the growth aspects that we are looking at, and certainly, this is where we want to position FCT for growth going forward, right?
Again, if you look within the stable of Frasers itself, definitely there are opportunities because FPL came in with us when we acquired the 50% of NEX. So we own 25.5% today, and they own 24.5% of NEX, right? That is something that is not, for them, it's a case of not holding this asset for long term. This is where we look towards having the opportunity to buy out the 24.5% stake. Of course, within the stable, we also have the Northpoint City South Wing.
So, what I'll say is that we have transitioned from an organic growth opportunity to now even position ourself for further growth, right, from both acquisition and AEI. The last point there you can see is that we spoke a lot about this, and this is something that we're continuing to work on, looking at how to position ourselves in terms of omni channel, how to take advantage and leverage on the hybrid work arrangement to capitalize on the growing segment of the catchment market that may be residing or staying back, and not going to work and be available for us to serve on a weekday basis as well. So with that, I'll end our presentation and happy to take questions because I could see many hands already coming up from the various people on the call.
Great. Thank you, Richard. Thank you, Audrey and Pauline. So we're moving to the Q&A session. With that, so before you want to ask question, please state your name and also the company that you come from. Let's take the first question from the audience. So we have Geraldine. I see Geraldine Wong in the first of the queue. So Geraldine, please unmute yourself and go ahead.
Hi, morning. Progress on the great set of results, which I received. My first question would be, are you able to get us on the rate subject for FY 2023 and FY 2024 interest? Where should we be expecting our average cost of debt to go?
Geraldine, we cannot really hear you that well because it is quite noisy in the background. Maybe let me just I believe you asked about the cost of debt, right?
Yes. For FY 2023 and FY 2024, are you able to repeat that?
The cost of debt outlook for-
Yeah.
FY23 and FY24.
Yeah. I think we have shared this before, even in our last sharing session in the first quarter. We are looking at this year to be hitting an average about high 3%, and this is still something that we are holding on as our projection for this year. For next year, it's anybody's guess, right? I mean, Geraldine, we know that the market is a bit volatile. One day we hear that the rates might be going up, the next day we hear that it could be stabilizing. I guess, again, fundamentally going back to the principle that there are things that we can't control. The interest rate is certainly something that we cannot control.
But what we can control is how we want to position ourselves, how we want to manage our capital, and Audrey and her team have been working very hard on this, and which is why you see the movement has been not as large as what you have anticipated, right? Moving from 3.5%- 3.6%. We continue to look at how we can optimize our position. We could give you guidance in terms of this year, but for next year, I think that's something that is still a little bit longer. The runway's a bit longer. I hope that answers your question, Geraldine.
It's okay, Richard. [inaudible]
I cannot really hear you, Geraldine. If you have a question, maybe you can send us a text. That might help. Second question in the queue, we have Joel Siew from DBS Bank. Joel, please go ahead.
Hi. Thanks for the presentation. I have two questions. The first is regarding the loans. I believe you did an Australian loan and swapped it to SGD. Could you share the thinking behind that? I am just wondering what is going on there. Thanks.
Yeah. Okay. Maybe, Audrey, you want to take that?
Yeah. Okay. Joel, the AUD was drawn down because when we compare Aussie and Sing dollars rates, Aussie give much lower interest rates and preferential rates as compared to the Sing dollars. As far as the vehicle is concerned, there is no FX exposure because as what you have shared earlier on, it is actually swapped to Sing dollars. We draw down in Aussie, we swap to Sing, and then on the maturity, we actually pay on in Sing. So there is no exposure in terms of FX. In terms of rates, we actually swap it also to Sing dollars fixed rate interest, which is lower than the Sing dollars rate as at that point in time.
Maybe if I can just add to that. As I mentioned when I was responding to Geraldine's question, we need to be a little bit more involved in terms of managing our capital part of things, right? We look at where we can take advantage of a more optimal combination, we will. Which is why the team, at that point in time, AUD was giving a better rate, so we swap it, we have hedged everything, we have fixed without any exposure, and yet we get to benefit or enjoy a slightly better rates. These are things that we can continue to work on, things that we can continue to source and see how we can optimize our position. The team will continue to do so, whether it be AUD today, yen tomorrow-
JPY.
whichever currencies that give us the best combination. But the criteria has always been that we do not take the exposure. The Forex exposure is eliminated because we fix everything up front, right?
Great. Thank you. My second question is regarding the associates. I noted that you took part in a DRP for Hektar REIT recently. I understand there was an earlier rights issue that you did not take part in. I am just wondering, what are your thoughts on this and has something changed?
No, it has not changed. Fundamentally, it is when there were rights, we wanted to also have the opportunity to, at that point in time, to bring in some new investors. We are happy with our position at Hektar, the stake that we have today. So that is the reason why we chose not to participate in the rights. In terms of the participation in the scrip, that is where we look at the current position of the REIT. The gearing is a little bit higher than what we would have liked it to be. So it is a case of some of the major unitholders taking part in this to preserve some cash, so that we can then hopefully bring down the gearing level from where it is today. So it is just a case of strengthening the balance sheet of the REIT.
That's all from me. Thank you.
All right. Thank you. We have one question from the chat. That's from Simon [Jeong]. The question is on shopper traffic. It says, if retail is resilient, why isn't shopper traffic back to pre-COVID? Could it be that people are shopping elsewhere, like back to Orchard Road? Or is it that they are not shopping in the malls? Are they missing shoppers, those which are typically shopping at a specific trade like F&B?
Okay. Simon, this is an area that we have spoke about this, and we'll continue to address this because fundamentally, just ask yourself today, I'm not sure about your organization, but a lot of organizations, do you see people going back to work 100%? I don't think the answer is yes. You have some maybe three days, two days, some four days, one day, some even lesser. Fundamentally, if you look at our malls, we are so well connected. In the past, before COVID, in the morning, you see throngs of people going through the mall. Because they need to get access to the MRT station, bus interchange to go to work, and the reverse happens in the evening. So there's always transient customers that go through. Yes, maybe they might pick up coffee, a bun or whatever on the way.
But this is where we have now gone back to 100% work in the office. So there's still a component of people still working on hybrid arrangement, flexible arrangement. Yes, maybe perhaps some people may choose to go to town on weekends and so on. But the bulk of it is really coming from the transient customers in the morning and evening. This is where we see that it has in fact grown back to, meaning that maybe even now some of these people are starting to go back to work in the office. So the proportion has also been increasing. In the past, we were looking at about 20% below pre-COVID, but today we are looking about 16%. So it has grown steadily. Some malls have grown faster than the others. But again, that is fundamentally the main reason for the gap in shopper traffic.
Thanks a lot, Richard. Just to clarify, the reason I ask is because we've heard some other REITs who have maybe Orchard belt kind of exposure saying that shopper traffic has actually surpassed 2019. Hence the question. It is interesting that you mentioned in your interpretation of your portfolio, the reason for the shortfall is more people not going to office. I actually would have thought the reverse, which is the more people work at home, the more they will shop at suburban malls. So you are saying that the hypothesis is wrong, is it, in your mind?
It is not wrong. It is a proportion that is missing from the morning and the evening. There are still people. What we see is on a weekday, especially during lunchtime, we see more people going to the mall. But again, the proportion or the numbers that goes in there as compared to the transient customers that go to work on a daily basis on two ways, to and fro, it is a different proportion. We are happy because you see the sales has grown. So that is fundamentally one testament to say that there are people who go to the mall and shop. More purposeful visit has increased. People who do work at home, they go there, they eat, they shop. But the transient customers may have reduced more than what it was before. So I think that is the hypothesis that we have, actually.
I see, and therefore it does not really matter to you guys, even if these transient malls. Because if I am on the way to work, the most I will buy is probably breakfast and on the way back, maybe dinner or something, but it is not like I am going to linger and shop meaningfully in the mall. Therefore, this loss of shopper traffic is not such a huge impact to your portfolio.
Yeah, I think fundamentally, of course, Simon, we will continue to try and work on increasing the traffic, but increasing, again, purposeful visit traffic. People who go there and shop. And also spend more time and buy more at the mall. So that is fundamentally what we are always going after. The numbers itself tells you one thing, but the sales number is still ultimately the critical area that we look at. We work on both, right?
Okay. Thank you.
Great. Thank you, Simon. The next question is from Brandon. Brandon from Citi, please go ahead.
Hey, hi. Hey, morning, Richard.
Morning, Brandon.
Just a couple of questions. Can you let us know, are there any plans to address the high gearing ratio of 39.6%? Are you looking at divestments or do a bit of equity fundraising? Yeah.
Okay. Definitely, I think this is where we are currently just slightly below 40%. We want to again look at an optimal balance sheet position that also, as I alluded to just now, I think we are now shifting gear. Not just looking at it in terms of organic growth, but we want to grow the scale that we have today. If we want to do that, we need headroom. We need balance sheet position. This is where we will evaluate all the options that is available to us, and rightly so that you have mentioned, whether it be divestment of asset, we will not discount that. We will continue to look at our portfolio to make sure that we are optimal.
As we strengthen the quality of the assets that we are bringing in, then we can look at what are the assets that maybe it is down the line, where we think that it is not for us to keep in the long term. We will evaluate that and reconstitute our portfolio. Yes, our equity fundraising is again, market-driven. We have to assess the market, the condition, and see whether is it right timing. Is it something that we are doing because we have specific ideas on how we are going to use the fund and so on. Because, if we go out to the market and get funds from that perspective, we have to also be able to articulate why we are going to do the funds.
Just a follow on that. Will you be open to raising at par the book value? If you look at the last fundraising exercise back in 2020, it was done about 7% above NAV. Obviously, that exercise did quite well. But given where the market is looking and your share price is up very well, congrats on that. Is this something that you explore?
Okay. Again, the question will really be if we raise this money and this money can be used for us to, let's say, acquire something that we think is going to give us value. Maybe not immediately, but be able to demonstrate and articulate that these funds that we are taking is going to generate a better return, not just today, but in the longer term. I think those are questions, those are evaluations we need to make right before we decide and say, look, should it be how many percent above NAV, on par or below NAV? Because at the end of the day, if we are going to use these funds to acquire something that is not going to increase the value for the unit holders, I do not think that is something that we will do.
Okay. Just one last one for me. Just going back to the reversion. How challenging or difficult has it been to sort of achieve this number, given all these cost pressures that we have been hearing in the market, and how should we see it for the second half of the year?
I think definitely it is challenging. You go out to retailers. No retailers are going to volunteer and say, "Look, thanks very much. I had 14% growth in my sales. I share half with you." It is not going to happen that way. There is always a lag in terms of the market. We will continue to work very hard, but fundamentally, it comes back to the fact that if we can drive sales, if your sales have gone up by 14% and if your cost has gone up by even 7%, 8%, we should be able to benefit from that additional increase that you are generating. Our OpEx, as you have seen in our annual report, is down to 16.2%, but today it is even below that.
So meaning that there is actually a gap between what you are getting, the growth you are getting, what you have to incur as a cost, and that is something that we should be sharing the upside that you are getting. The conversation, it is a lot easier than what I would say 24 months ago because there is no clarity despite the fact that the sales was already increasing back then. But today, I think, it is easier for us to be able to work with the retailers to say, "Look, let us work together and see if we can continue to generate this kind of sales for you. We should be rewarded in terms of reversion." That is one. Secondly, it is also a case whereby we are doing a lot of things. We are doing AEI. We are doing improvements to our malls as well.
Some of those things that you do not see and that is happening. I would say that the growth that you are seeing, the 1.9%, is also partly because certain malls we are repositioning. Maybe those malls may take a little bit longer to get to the level that we want. It is a bit of balancing. We get some upside from some, but we also want to fix some of the malls, that we think it is going to help us to be more sustainable going forward, and that will help the portfolio as a whole. Just to dwell a little bit on this point. We have also done changes to our mall. For example, Causeway Point, we brought in a stronger supermarket operator, and that has seen an improvement overall, in terms of the sales for the basement.
We brought in Don Don Donki into Northpoint City, for example, Waterway Point. Those are things that we are continuing to tweak. As we tweak, sometimes it may have a little bit of impact on the rental reversion at that point in time. We see it as a long-term growth opportunity that we want to continue to invest in the malls and make sure that it is going to be more sustainable and benefit the overall performance of the mall as a whole.
Maybe just to add on to Richard's point, I think that scale is very important as well. Because having that scale gives us the ability to take a hit, say, on one mall, but we are able to still sustain the overall performance across the portfolio. That is where scale comes in at the top line.
All right. Hey, thanks so much, Pauline and Richard.
Yeah, thanks.
Thank you.
Right. Thank you, Brandon. Next question is from Tan Xuan, Goldman Sachs. Tan Xuan, please go ahead.
Hi. Morning. My first question is a follow-up. I think Richard, earlier you mentioned that you might potentially look at deals that are not immediately accretive. How should we think about this deal, and how soon can we think about this deal becoming accretive?
Tan Xuan, I think that is on a general principle.
All right.
We evaluate all deals. It does not mean that we are looking at deals that is non-accretive today.
Yeah.
For sure, for every deal that we look at is to see how best can this deal, if there is a deal that we are going to bring on board, benefit our portfolio. Whether it be in terms of continuously building the scale, as what Pauline mentioned, immediate accretion, or maybe perhaps the accretion can just take a little bit longer once we can bring it in and do something to the mall. So those are the various considerations that we have to evaluate on a case-by-case basis when opportunities present itself. You are asking in terms of when, how soon, and how fast and all this. I mentioned that at least for us, we have, in a way, the sponsors pipeline still available for us.
We have acquired the 25.5% stake in NEX, and we would certainly like to have the other 24.5% stake when the sponsor is ready to divest. We also must be ready that we have funds available for us to invest in that asset. That is a wonderful asset, which we would definitely want to increase our share of that.
Right. I think you also mentioned about shifting gears to inorganic growth, right? Is the key hurdle right now really just ability to raise funds? How should we think about gearing over the longer term?
Okay. I think, of course, one hurdle definitely is having enough funds. We would have acquired the entire NEX if we could back in January. Because we do not have enough headroom, the market was challenging. The market was literally closed at that point in time for equity fundraising. So funds has always been one consideration whenever we acquire and vis-à-vis what the market condition, what the market is telling us. That is one, right? So definitely that is one hurdle that we have to overcome. That is not the only hurdle that we overcome, because whenever we evaluate an opportunity, like what I said, it has to make sense over the long term for the entire portfolio and for the unitholders.
Can you also comment a bit about sponsor's assets in terms of stabilization?
In terms of stabilization, what are you referring to?
Do you think that if funds are available, are those assets stabilized enough for you to think about acquisition?
Okay. I guess this is a question for the sponsor. I think they have to evaluate whether whatever work that they were doing, is it sufficient or are they going to do some more work, when they are ready to divest and at which point in time. Those are questions more pertinent to the sponsors. But for us, as far as we are concerned, is that we look at what is available and are those assets that make sense for us, are those assets that is going to improve the quality of our portfolio? And the answer is yes. So the case will be that we have to be able to be ready, and if they want to divest, that we are there to take up these assets.
All right. That is very clear. Thank you so much.
All right. Thank you, Tan Xuan. Next question is from Terence Khi from J.P. Morgan. Terence, please go ahead.
Hey, thanks for the opportunity to ask a question. Just maybe two questions from me. Do you see weaker demand in March, given that we've seen stronger versus pre-COVID, but there was a slight dip in March? Also on the AEI at Tampines 1, will there be any impact on the occupancy?
Okay, let's take the AEI first. Whenever you do AEI, unless the AEI is very nominal, it will have some impact in terms of the occupancy, in terms of disruption to the operation. This AEI is quite significant. We shared about this before. We also mentioned this before in the past, if there's going to be disruption to the performance of the mall, we would then look at utilizing the AMV component to cover the gap that is affected by AEI, because this is a temporary nature. This is what we have done in the past, and this is where we will also be using AMV to cover the drop or the impact as a result of the AEI. I think that kind of take care of your questions on the AEI. The other question is weaker demand in March.
If you look at generally, the trend has always been such that you get the pent-up demand in the festive period, your December, January, February. It's where the bulk of the sales comes in, and there's a lot of buying and so on because of festivity. March is usually a little bit down, and also partly there's school holidays and you'll probably be aware that people are still, for those who are— Now that the market is open, borders are open, so there's a bit of traveling. March is typically lower than what we could be expecting because there's also a little bit of fatigue, right? You've been shopping December, January, February. Not sure how many months you can continue to do that. Of course, the essential products, the essential side of things continue to bring in the sales.
Yeah. Richard-
Okay. Thanks.
-if I may add on to your-
Sure.
-response on that. I think, Terence, just looking at one month by itself doesn't really tell the full story because there is various seasonality at play. Say, for example, timing of Chinese New Year, so forth. There's also other factors like, for example, we have the GST increase at the end of last year, right? But if you look at, say, the first three months of this calendar year, actually you see that the overall sales trend has trended above. It's actually overall, the sales have come in stronger than last year. I think that's a more meaningful way of looking at the stats.
Thanks, Pauline, and thanks, Richard. Just a final one from me. I know you can't share very much on NEX, but is there a possibility you could at least share the occupancy or how you are contributing to future improvements in NEX? Yeah. Thanks.
Yeah. Okay. I'll just share what we could and then Pauline can also jump in. In terms of occupancy, it's doing very well. If you go to NEX today, maybe you can just take a look and see how many of the units are not occupied. That will give you a sense. It's very much aligned with our dominant malls, like the likes of Causeway Point, Northpoint City, et cetera. They are performing very well. And this is where, again, Pauline, coming back to the perspective that it's a very high-quality asset. Our team has already started engaging with the team that's managing the asset. And I think one of the key differences, we manage a portfolio and they manage one asset. That is where we think there's a lot of value we can bring to table.
Scale does make a lot of difference in terms of negotiations, in terms of getting deals done, in terms of working with vendors, et cetera. All those are things that it's a really ongoing. Of course, some of them take time because not every contract expires today. It takes time for some of this to then flow through. But definitely our team are working with their team because we mentioned before, for us, it's more active management and not just passively making an acquisition.
I have an easy answer to that question. It's touching 100% as at 31st March. Yeah.
Thank you so much. That is all I have for now.
Right. We have one more question from CLSA, Yu Qiang. Yu Qiang, please go ahead.
Hi. Can you hear me, see me?
I can. Yeah. Now I can hear and see you.
Yeah. I just want to have your thoughts on Central Plaza. This is the only office in your portfolio. Do you consider it as a distraction?
The short answer is it's no, because this is part of an integrated development for Tiong Bahru Plaza. We mentioned this before. It's not a very sizable component of the overall scheme of things. At the same time, we feel that this asset is not optimal because the occupancy is something that we can still work on. The trade mix is something that we can work on. We have utilized some of the space from office to also retail or sub-retail because we brought in schools, we brought in clinics, et cetera, to occupy some of the lower floors so that the connectivity is important. The traffic from the office building is supporting the retail. It is definitely not a distraction.
This is something that we will always keep a watch in terms of the performance and when it is optimal, I think that's when we will then decide whether it's something that we will continue to keep or otherwise. But it definitely has-
Would it be fair to say that the sponsor has better experience in managing office and maybe you can swap it, sell it back to the sponsor, and then you take something from the sponsor's existing portfolio?
I think again, this is a question that the sponsors will have to look at. But definitely in terms as a group, because we do have access to office component and all that, we do get help across the board in terms of marketing, leasing and so on. So it is not a case of just because we are retail, only the retail guys are looking at that part of the business.
Okay, second question. In terms of our existing portfolio, do you see anything that is sort of performing under your expectations that if given the opportunity, you would take a look at divesting those? Is there any names that come to mind?
I would not name specifics, but definitely we are still working on a few assets, improving occupancy, improving the performance of the assets. Again, when we evaluate our portfolio, we look at it on a longer-term perspective, right? At the end of the day, I think it is also a question of, if we were to go out to the market and say we want to divest certain assets, does it make sense in today's market? Are we able to get what we want? So those would be the questions that we have to ask ourselves as well, right? We can identify an asset, but if you put it up to the market and do not get the value that you want, it is not going to work for us either.
So it is a question of both from the market perspective and also from our strategy over the long period of time.
Okay, last one. How much did NEX contribute for first half 2023?
In terms of-
To the JV line, through the JV associate line. Did they contribute?
Yeah, Audrey?
Yes. So-
What was the amount?
Yeah, the distribution. For Sapphire Star Trust and also [inaudible] Waterway Point, sorry, and also NEX has contributed about 86% of the total DI. Because during the period, we increased our stake for Waterway Point from 40%- 50%.
Yeah.
And new contributions from NEX for the effective stake of 25.5 million.
Percent.
Or 25.5%. Sorry.
A dollar value for NEX contribution, can you provide or no?
I can't provide specifically, but the two assets add together is about 86%.
Okay. I'll take it offline.
Yeah.
Okay. That's it from me.
Thanks.
All right. We have a second round question from Geraldine Wong, asking about, the question is, in terms of acquisition, will you want to maintain gearing at current level and below 40%? Any timeline for that?
The question is: if we acquire, will we keep to the current gearing? Is that what is the question?
I believe so, because that's what appears on the screen.
Sorry. Can you repeat the question again?
In terms of acquisitions, will you want to maintain gearing at current level and below 40% level? I guess the end should be all. That means if you buy something, will you maintain your gearing at current level? That means it is close to 40% or below 40%, and any timeline for that.
Yeah. Maybe if I look at it or respond the question in another way of looking at things, is that in the long term, our strategy has always been to keep our gearing to 36%-38% range. So that has always been what we want to achieve. Also, that allows us to build some headroom in case opportunities become available to us. But again, it depends on the timing. When we acquired NEX, we had to gear up because that is the only solution for us at that point in time. So when we make certain acquisition, that is when the leverage or the gearing level tends to go up slightly higher than what would have been our long-term strategy. This is a strategy that we have to use depending on situation, depending on at which point in time, depending on what is available. Is the market available?
Are debt that makes sense at that point in time or how can we combine multiple efforts in terms of looking at raising funds, raising debt, or even divestment of assets. So all this come into play, but the short answer is on a longer term. That is the kind of gearing that we hope to be in a position for FCT.
Right. Thank you, Richard. We have the last question from Tan Xuan. Tan Xuan, please go ahead.
Hi. Can I just follow up on NPI margin is holding up quite well. For second half and also looking ahead, is there any other incremental cost that we should be aware of? Or is this a good run rate?
I would say it's a bit of both. We would expect our revenue to grow and at the same time, OpEx will also increase because as we spoke about this before, utilities is also one area that we are watching. That's something that's going to also affect us for the next six months. But this is where, again, we can't control oil prices, but we try to control and manage how we do the hedging, what kind of hedging we want to do, how long, how short, what are the malls that we want to go into hedge position, what are the malls we don't want to hedge position. Fundamentally, is we will again, focus on areas where we can control and hopefully we can navigate for the next six months.
Okay. Thank you.
Thanks.
Right. Thank you. There isn't any questions now in the queue. We still have about two minutes left. If you have any last questions that you'd like to pose here, please raise your hand or to just put it in the chat box. All right.
There is one hand.
Natalie. Natalie from CIMB. Natalie, please go ahead.
Hi, Richard. Hi, Fung-Leng. Hi, everyone. I just have a quick question. For the AEI at Tampines 1, should we expect that the full 8,000 additional GFA or NIA will be deployed and leased out by the end of this financial year?
That is definitely the target. In fact, as mentioned, we are already 90% leased for all the areas that is affected by AEI, not just the 8,000. So, our target is definitely to get it all within the 100% by this year or even sooner.
Okay. Thank you so much.
Natalie, just to clarify. Actually, it is not just the 8,000. I mentioned earlier the scope of the AEI impact about close to 30% of the mall. It is definitely beyond that quantum.
Okay. Can I also ask what is the occupancy cost for this hub?
What we could share is that it is lower than the 16.2% you saw in our annual report, like below 16%.
Okay. That is all from me.
Yeah. Sorry about that because we disclose the occupancy cost on an annual basis. This is a kind of interim.
Okay. Thank you so much. Thanks.
Right. There are no more questions in the queue. We would like to thank everyone who participated in this call, and we wish you a very good morning ahead. Richard, any last words?
No. It's good sharing this morning. I think the questions are relevant, and definitely, we shared a lot about the performance. We hope that you guys are as excited as we are. Definitely for our perspective, I think the team worked very hard to deliver this set of results. Occupancy, reversions, tenant sales, even traffic may not be back to what it was. It has increased, definitely. AEI is all go, so we are firing on all cylinders. Organically, we are doing well. AEI, we are ready to roll out, and we are planning more AEIs to come. Also, definitely, we are looking at increasing our size in terms of inorganic growth. I hope that those are the takeaway from this morning's session. Thank you very much for attending our briefing.
Right. Thank you, everyone. You may disengage now.
Thank you.