Frasers Commercial Trust
HOLD (Unchanged)
Last Price 0.165
52w k High (1/13/2010) 0.17
52w k Low (12/1/2009) 0.13
Target Price S$0.18 (+9.1%)
• 4Q10 revenue of $29.3 million, net property income of $23.2 million, distributable income of $9.5 million
• 4Q10 DPU of 0.31 cents
• Full year revenue up 21%, DPU up 29%
• Maintain Hold, target price $0.18
Spot-on DPU forecast
FCOT recorded 4Q10 revenue of $29.3 million (+14.1% y-y, +0.2% q-q), net property income of $23.2 million (+16.4% y-y, +2.3% q-q) and distributable income available to unitholders of $9.5 million (+54.6% y-y, +23.0% q-q). 4Q10 DPU was 0.31 cents (+55.0% y-y, +24.0% q-q). Full year results for the period 1 Oct 2009 to 30 Sep 2010 also improved correspondingly. Full year revenue was $117.9 million (+21.0% y-y) and DPU for the full year was 1.12 cents (+29.0% y-y) which was spot-on with our own forecast.
Favourable AUD, stabilization effect of Alexandra Technopark
The improved y-y performance is mainly attributed to the contribution from Alexandra Technopark, which was acquired in Aug 2009, as well as favorable exchange rate of the AUD. Revenue breakdown by country is Singapore: 51.7%, Australia: 35.2%, Japan: 13.1%.
All round improvement; Japan still the drag
Generally occupancy improved for the Singapore and Australia portfolio except for the Japan portfolio. Portfolio occupancy for 4Q10 was 90.8%. Occupancy by country is Singapore: 96.1%, Australia: 98.8%, Japan: 55.5%. Cosmo Plaza continues to be the drag on overall occupancy. Excluding Cosmo Plaza, Japan portfolio occupancy would be 93.5%.
Portfolio asset value registered $40 million valuation gain. The Singapore and Australia properties were revalued upwards by $54.8 million, however this gain was offset by a downward revaluation of $18 million from the Japan properties. Gearing is 39.6% with total debt of $828.4 million. Loan maturity is in the 2nd half of 2012.
We think the property portfolio has delivered a consistent set of results, ex Cosmo Plaza. Like we had mentioned in all our previous reports, FCOT needs time to reposition its portfolio and we had seen the transformation taking place. The problems plaguing FCOT are not new, however we do not expect to see a resolution soon. Namely Cosmo Plaza and AWPF.
Although the AWPF has gained slightly in asset value, it is not giving out dividend thus contributing nothing to FCOT revenue. We maintain that the successful divestment of these two would be a positive for FCOT, paving the way for the REIT to resume its expansion plan. For FY11E, we are forecasting a DPU of 1.19 cents which translate to a yield of 7.21%. We are rolling forward our valuation into FY11E and derive a target price of $0.18 based on our DDM model. Maintain Hold recommendation