Friday, January 3, 2014

Frasers Commercial Trust : Hidden value (DBSV)

Frasers Commercial Trust
BUY S$1.27
STI : 3,167.43
Price Target : 12-Month S$ 1.46
Hidden value

• Operationally resilient, organic growth in FY14
• Expiry of master lease at Alexandra Technopark to reap significant earnings upside
• Maintain BUY and S$1.46 TP

Operationally resilient, organic growth in FY14. Performance, ex-divestments, continues to strengthen - 4Q13 net property income would have shown an increase of 7%, supported by resilient portfolio occupancy of 97.9%. FCOT’s rental income is also supported by a long weighted average lease expiry of 4.6 years. In FY14, the trust will be renewing close to 8.5% of its topline, of where expiring rents are c.10-15% lower than market rents in Singapore and 30% lower in Australia.

Alexandra Technopark (ATP)’s master lease expiry to lift earnings. The expected expiry of the master lease in Aug 14 presents further earnings upside for FCOT. We estimate the property to report a net property income increase of cS$5m, given the positive spread between underlying passing rentals (S$3.50 psf pm) vs implied master lease rent levels (gross rent estimated at S$2.90 psf pm).

Attractive growth over next 2 years; BUY, TP S$1.46. Despite impact on a weak AUD-S$ rate, underlying earnings growth from its master lease should be more than able to compensate for translation losses owing to its Australian income. FCOT continues to offer an attractive growth profile of c7-8% over FY14-15F which is transparent and achievable. Forward yields of 6.6%-7.0% are attractive. BUY with TP S$1.46 maintained.

Source/Extract/Excerpts/来源/转贴/摘录: DBSV-Research,
Publish date: 02/01/14

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