Frasers Commercial Trust - CGS-CIMB Research 2019-06-26: Alexandra Technopark Secures Major Tenant

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FRASERS COMMERCIAL TRUST (SGX:ND8U)

Frasers Commercial Trust - Alexandra Technopark Secures Major Tenant

• Google to lease 344,100 sq ft of space at Alexandra Technopark.
• This boosts Alexandra Technopark’s committed occupancy to 93.7%.
• Upgrade to ADD with a higher DDM-based Target Price of S$1.64.

Alexandra Technopark secures Google as major tenant

• FRASERS COMMERCIAL TRUST (SGX:ND8U) announced that it has entered into a lease agreement with Google Asia Pacific Pte Ltd (Google) for the latter to take up 344,100 sq ft of space at Alexandra Technopark (ATP). The lease is for a term of 5 years, commencing in 1QCY20. The average gross rent is comparable to recent signing rents for the property.

Committed occupancy at Alexandra Technopark rises to 93.7%

• An earlier Business Times report cited that Google’s current office at Mapletree Business City II is fully occupied. The 344,100 sq ft lease represents 33.3% of the current net lettable area at Alexandra Technopark and would increase the property’s committed occupancy to 93.7%. This transaction highlights the robust office leasing market, given the low new incoming supply in 2019 and 2020.
• Frasers Commercial Trust continues to be in talks with other prospective tenants for the remaining vacant space at Alexandra Technopark, with improved rental pricing power, in our view.

CSC retail on track to open towards end-CY19

• Meanwhile, at China Square Central (CSC), the new Capri by Fraser China Square hotel has commenced operations in May this year, which should increase footfall and vibrancy at CSC. The retail component is still on track to open by end-4QCY19. Half of the expanded 80,000 sq ft of retail space had been pre-committed at end-1QCY19.

Low gearing to tap inorganic growth opportunities

• Frasers Commercial Trust’s gearing stood at 1% at end-2QFY19. With significant debt, Frasers Commercial Trust is well positioned to tap the UK and Australia.

Upgrade to ADD

• We leave our contribution from Alexandra Technopark. Accordingly, our DDM-based Target Price rises to S$1.64.
• We upgrade our rating to ADD from Hold.
• Frasers Commercial Trust is trading at 1% FY19F DPU yield, on the higher end of comparable office REIT peers. See Frasers Commercial Trust's dividend history.
• Downside risks include appetite on the back of slower macro outlook.

LOCK Mun Yee CGS-CIMB Research | EING Kar Mei CFA CGS-CIMB Research | https://research.itradecimb.com/ 2019-06-26

SGX Stock Analyst Report ADD UPGRADE HOLD 1.64 UP 1.500