Tuesday, February 4, 2014

Frasers Commercial Trust: Cranking up further growth (OCBC)

Frasers Commercial Trust:
Fair value S$1.45
add: 12m dividend forecast S$0.090
versus: Current price S$1.27
Cranking up further growth

Frasers Commercial Trust’s (FCOT) 1QFY14 DPU of 2.05 S cents (+29.7% YoY) was within our expectations. China Square Central and 55 Market Street were the key performers for 1Q, raking up NPI growth of 15.4% and 9.6% respectively on the back of higher secured rental and occupancy rates. Domestic leasing demand also remained relatively buoyant in our view, as positive rental reversions ranging from 10.7% to 20.7% were achieved during the quarter. Looking ahead, management continues to maintain its positive tone, highlighting that its under-rented portfolio assets and current occupancy rate provide room for further income growth. At Alexandra Technopark, we note that FCOT is currently receiving S$1.80 psf pm net rent for the master lease (vs. S$3.40 gross rent for underlying leases). Given that the master lease makes up a significant 21.7% of FCOT’s rental income, we are thus positive on its performance in FY14. Maintain BUY with unchanged fair value of S$1.45 on FCOT.


1QFY14 results met expectations
Frasers Commercial Trust (FCOT) delivered 1QFY14 NPI of S$22.1m, down 3.5% YoY due to a weaker AUD, lower occupancy at Central Park and absence of contribution from its divested Japan properties. However, the softer NPI was more than offset by a realized gain from its cashflow hedges, lower interest expenses and savings in the convertible perpetual preferred unit (CPPU) distribution following the net conversion/redemption of the CPPUs. As such, distributable income to unitholders jumped 33.4% YoY to S$13.7m, while DPU climbed 29.7% to 2.05 S cents. This falls within market expectations, as the quarterly DPU constitutes 22.9%/23.3% of our/consensus full-year DPU projections.

Portfolio continued to exhibit resilience
China Square Central (CSC) and 55 Market Street were the key performers for 1Q, raking up NPI growth of 15.4% and 9.6% respectively on the back of higher secured rental and occupancy rates. As a result, Singapore portfolio contributed 50% of FCOT’s NPI, up from 47% in the prior quarter. Domestic leasing demand remained relatively buoyant in our view, as positive rental reversions ranging from 10.7% to 20.7% were achieved during the quarter. On the portfolio front, occupancy rate was also stable at 97.1% (4QFY13: 97.9%), while weighted average lease to expiry was largely unchanged at 4.4 years (4QFY13: 4.6 years).

Maintain BUY
Looking ahead, management continues to maintain its positive tone, highlighting that its under-rented portfolio assets and current occupancy rate provide room for further income growth. Specifically, FCOT shared that the opening of the Downtown Line nearby CSC is expected to improve its connectivity and boost its attractiveness. At Alexandra Technopark, we also note that FCOT is currently receiving S$1.80 psf pm net rent for the master lease (vs. S$3.40 gross rent for underlying leases), and is well positioned for rental uplift upon the lease expiry in Aug. Given that the master lease makes up a significant 21.7% of FCOT’s rental income and strong execution by management, we are thus positive on its performance in FY14. Maintain BUY with unchanged fair value of S$1.45 on FCOT.



Source/Extract/Excerpts/来源/转贴/摘录: OCBC-Research,
Publish date: 23/01/14

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