FRASERS COMMERCIAL TRUST
ND8U.SI
Frasers Commercial Trust - More Excitement From Alexandra Technopark
- FCOT has had a great year as its full year DPU grew 14.1% YoY, meeting ~97% of our expectations. However, in view of a bleak office rental outlook, we maintain BUY and lower our DDM-derived TP to SGD1.54 (from SGD1.71, 12% upside).
- Despite a slight dip in occupancy to 95.4%, we note that its portfolio commanded a strong rental reversion up to 17.6% for the quarter.
- We also see potential to unlock further value from Alexandra Technopark via AEI.
Had a good year, results within our expectations.
- Frasers Commercial Trust (FCOT) registered 4Q15 strong DPU growth of 14.0/14.1% YoY, meeting ~97% of our full year expectations. The strong performance was underpinned by:
- a higher contribution from underlying leases following the expiry of the master lease in Alexandra Technopark (ATP) and,
- offset by the weaker Australian currency.
Stable Occupancy, with strong rental reversion in SG.
- The average portfolio occupancy for the quarter dipped slightly to 95.4% (previous: 96.5%), while maintaining strong positive rental reversion from +2.8% to +17.6%. As a result, the overall weighted average rental reversion of ~17% for its Singapore portfolio for FY15.
- However, given the bleak outlook within the office leasing market, we think the high double digit rental reversion is unlikely to be sustainable in the following year.
What could be next for the counter?
- We see a potential to unlock further value from Alexandra Technopark from its asset enhancement initiative (AEI), given that the science park building had not undergone refurbishment for the past 15 years.
- Compared to the approximately SGD6.50psf/month asking price for its Mapletree Business City (MBC) counterpart, we believe that the rent for ATP can be raised after AEI. Assuming a 25% increase in ATP’s asking price SGD5.00psf/month, it would still be at a wide 30% discount to MBC’s rental rates.
Maintain BUY with a lower TP of SGD1.54.
- We continue to like the REIT for its exposure to the less-volatile office spaces. In addition, we think that the AEI on ATP would provide a catalyst to its share price performance in the near term.
- However, we lower our TP to SGD1.54 in view of a weak office leasing outlook. Maintain BUY.
Ivan Looi
RHB Research
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Ong Kian Lin
RHB Research
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http://www.rhbinvest.com.sg/
2015-10-26
RHB Research
SGX Stock
Analyst Report
1.71
Down
1.54
