Frasers Commercial Trust - CIMB Research 2016-01-21: ATP and 357 Collins Street shine

Frasers Commercial Trust - CIMB Research 2016-01-21: ATP and 357 Collins Street shine FRASERS COMMERCIAL TRUST ND8U.SI 

Frasers Commercial Trust - ATP and 357 Collins Street shine 

  • 1QFY16 DPU of 2.51 Scts (+2.2% yoy) was within expectations, making up 26% of our full-year estimate. 
  • 357 Collins Street outperformed with 100% committed occupancy. 
  • FCOT is relatively sheltered from incoming office supply, as only 7.6% of its FY16 GRI are offices which would be up for renewal. 
  • Hotel construction at CSC is expected to be completed ahead of schedule. 
  • We maintain our Add rating with a lower DDM-based target price of S$1.57


■ 1Q16 bolstered by better performance of ATP and first full-qtr contribution from 357 Collins Street 

  • 1Q16 gross revenue grew 12% yoy to S$39.6m due to higher contributions from Alexandra Technopark (ATP) thanks to higher rental rates and upfront rental income received from a pre-terminated lease, plus first full quarter contribution from 357 Collins Street. 
  • The negatives were a weaker A$ and lower occupancy rates for China Square Central (CSC) and Central Park. 
  • NPI margins ticked up 0.6% pts qoq to 74.1%. Consequently, distributable income increased 18% yoy to S$19.7m. 

■ 357 Collins Street outperformed 

  • The actual gross revenue of 357 Collins Street for 1Q16 was 10% higher vs. forecasted, with the property having committed occupancy of 100%. As a result, 357 Collins Street’s NPI of A$3.9m was 14% higher vs. forecast due to higher occupancy and lower expenses. 
  • The trust achieved a portfolio occupancy rate of 92.9% (Singapore: 92.7%; Australia: 93%). 

■ Low lease expiries for the Singapore office properties in FY16 

  • CSC and ATP enjoyed positive average rental reversions of 10.3% and 5%, respectively, in 1Q16. 
  • Average passing rent for expiring leases was S$6.30 psf for offices in CSC and S$6.80 psf for 55 Market Street vs. Grade B island-wide of S$7.70 psf. 
  • We deem that FCOT is relatively sheltered from incoming office supply of 3.7m sq ft in FY16, as only 7.6% of its GRI are offices which would be up for renewal. 
  • We note that 357 Collins recorded -4.1% rental reversion for a small retail space (0.5% of NLA of the property). 

■ Hotel construction at CSC expected to be complete in mid-19 

  • The site for the development of a 16-storey hotel at CSC has been handed over to FCL in preparation of construction works. Construction is expected to commence in 1Q16 and completed in mid-19, ahead of initial schedule. 
  • Minimal disruptions are expected for retail in the meantime; and we deem that the completion of the hotel could enhance CSC’s frontage and boost its value in the longer term. 

■ Maintain Add 

  • We continue to like FCOT for its under-rented Singapore properties and value-unlocking activities. 
  • We maintain our Add rating with a lower DDM-based target price of S$1.57, as we realign our equity discount rates alongside the sector. 
  • Otherwise, we make no changes to our DPU forecasts.



LOCK Mun Yee CIMB Securities | http://research.itradecimb.com/ 2016-01-21
CIMB Securities SGX Stock Analyst Report ADD Maintain ADD 1.57 Down 1.62


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