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Frasers Commercial Trust - CIMB Research 2015-12-09: Going from strength to strength

Frasers Commercial Trust - CIMB Research 2015-12-09: Going from strength to strength FRASERS COMMERCIAL TRUST ND8U.SI 

Frasers Commercial Trust - Going from strength to strength 

  • FY15 earnings driven by ATP. 
  • Book NAV was eroded by the weaker A$ in FY15. 
  • Occupancy remains high. Under-rented Singapore assets offer potential positive rental revisions. 
  • FCOT will continue to drive earnings growth through proactive asset management. 
  • We continue to like FCOT for its under-rented Singapore assets and value-unlocking activities. 
  • Maintain Add with an unchanged target price of S$1.62. 


■ FY15 earnings driven by Alexander Technopark 

  • FCOT’s NPI rose 12% yoy in FY15 on the back of higher revenue from Alexandra Technopark (ATP) due to the expiry of the master lease in Aug 2014, better occupancies and rents at China Square Central (CSC) and 55 Market St (55MS), as well as maiden contribution from 357 Collins St in Melbourne. 
  • The improved operational performance helped to offset the weaker A$, as the trust recorded all-time high DPU. 

■ Book NAV was eroded by weaker A$ in FY15 

  • FCOT’s book NAV dipped from S$1.61 at end-Sep 14 to S$1.54 at end-Sep 2015 due to lower value of CSC and Central Park, as well as the drag from a weaker A$, which offset the small compression in cap rate for its Australian properties. 
  • FCOT’s portfolio value stood at S$1.95bn at end-Sep 2015, including the recently-purchased 357 Collins St. 

■ Occupancy remains high; Under-rented Singapore assets 

  • FCOT achieved 94.6-96.2% occupancy for its Singapore properties in FY15; 88.6% for Central Park and 98.4% for 357 Collins St. 
  • For FY15, Singapore properties’ renewal rents rose 5.7-17.9%. 
  • In Australia, Hamersley Iron Pty Ltd (6.2% of portfolio income) signed a heads of agreement for a 12-year lease until FY30. 
  • We estimate that 18.6% of FY16 and 16.9% of FY17 rental income are due to be renewed. We expect reversion to remain positive as current spit rates are 3-15% above passing levels. 

■ Proactive asset management 

  • FCOT will continue to drive earnings growth through proactive asset management. It recently sold its rights to the hotel gross floor area (GFA) at CSC and plans to enhance the property by relocating certain basement retail areas to the ground floor in order to provide room for uplift in rents. The S$7m exercise is scheduled to start in early 2016. 

■ Maintain Add 

  • We continue to like FCOT for its under-rented Singapore assets and value-unlocking activities, which are potential catalysts. 
  • We retain our Add rating, with an unchanged DDM-based target price of S$1.62. 



LOCK Mun Yee CIMB Securities | http://research.itradecimb.com/ 2015-12-09
CIMB Securities SGX Stock Analyst Report ADD Maintain ADD 1.62 Down 1.62


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