Frasers Commercial Trust (FCOT) reported a 28.8% YoY jump in 3QFY13 DPU to 2.19 S cents. This was due to lower interest costs and distribution savings following the redemption of 319.7m Series A Convertible Perpetual Preferred Units (CPPUs) this year. As at 30 Jun, we note that the portfolio occupancy improved by 2.8ppt QoQ to 98.1% , while the weighted average lease term remained strong at 4.6 years. Positive rental reversions ranging from 0.5% to 17.4% were also achieved for leases commencing in the quarter. More importantly, FCOT has successfully completed the renewal of 511,000 sqft of the underlying leases at Alexandra Technopark (ATP) ahead of expiry in FY14-15, hence substantially improving its lease expiry profile (excluding the ATP master lease, FY14 lease expiry would fall from 27.7% to 7.1%). These efforts, together with the completion of the Precinct Master Plan and asset enhancement works at China Square Central, are set to enhance FCOT’s operational performance and position FCOT for further growth in future, in our view. We are leaving our forecasts largely unchanged for now, but we revise our fair value from S$1.60 to S$1.58 due to a marginally higher risk free rate. Maintain BUY.
3QFY13 results broadly in line
Frasers Commercial Trust (FCOT) reported 3QFY13 gross revenue of S$30.0m and NPI of S$23.1m, down 16.1% and 13.4% YoY respectively due to a weaker AUD and divestments of KeyPoint and Japan properties. However, income available for distribution to unitholders rose by 31.2% to S$14.4m as a result of lower interest costs and distribution savings following the redemption of 319.7m Series A Convertible Perpetual Preferred Units (CPPUs) this year. This led to a similar jump of 28.8% in the quarterly DPU to 2.19 S cents. For 9MFY13, DPU tallied 5.76 S cents, up 16.6%. This is in line with our expectations, given that the 9M DPU have met 78.9% of our FY13F DPU (consensus: 73.8%).
Executing well
As at 30 Jun, the portfolio occupancy improved by 2.8ppt QoQ to 98.1% (2Q: 95.3%), while the average lease term remained strong at 4.6 years (2Q: 4.8 years). Positive rental reversions ranging from 0.5% to 17.4% were also achieved for leases commencing in the quarter and these includes tenants from diverse sectors. More importantly, FCOT has successfully completed the renewal of 511,000 sqft of the underlying leases at Alexandra Technopark (ATP) ahead of expiry in FY14-15, hence substantially improving its lease expiry profile (excluding the ATP master lease, FY14 lease expiry would fall from 27.7% to 7.1%). These efforts, together with the completion of the Precinct Master Plan and asset enhancement at China Square Central, are set to enhance FCOT’s performance and position it for further growth ahead, in our view.
Maintain BUY
On the capital management front, we note that FCOT’s average borrowing rate has also improved from 4.0% in 3QFY12 to 2.8% after refinancing its loans over the past year (2Q: 3.2%). In addition, FCOT shared that 51.0% of its borrowings are hedged into fixed rates, which should provide some certainty to its financing costs. However, gearing has crept up to 39.5% from 31.7% after the CPPU redemption, thus possibly posting some restriction to its financial flexibility. We leave our forecasts largely unchanged, but revise our fair value from S$1.60 to S$1.58 due to a marginally higher risk free rate. Maintain BUY.
Frasers Commercial Trust (FCOT) reported 3QFY13 gross revenue of S$30.0m and NPI of S$23.1m, down 16.1% and 13.4% YoY respectively due to a weaker AUD and divestments of KeyPoint and Japan properties. However, income available for distribution to unitholders rose by 31.2% to S$14.4m as a result of lower interest costs and distribution savings following the redemption of 319.7m Series A Convertible Perpetual Preferred Units (CPPUs) this year. This led to a similar jump of 28.8% in the quarterly DPU to 2.19 S cents. For 9MFY13, DPU tallied 5.76 S cents, up 16.6%. This is in line with our expectations, given that the 9M DPU have met 78.9% of our FY13F DPU (consensus: 73.8%).
Executing well
As at 30 Jun, the portfolio occupancy improved by 2.8ppt QoQ to 98.1% (2Q: 95.3%), while the average lease term remained strong at 4.6 years (2Q: 4.8 years). Positive rental reversions ranging from 0.5% to 17.4% were also achieved for leases commencing in the quarter and these includes tenants from diverse sectors. More importantly, FCOT has successfully completed the renewal of 511,000 sqft of the underlying leases at Alexandra Technopark (ATP) ahead of expiry in FY14-15, hence substantially improving its lease expiry profile (excluding the ATP master lease, FY14 lease expiry would fall from 27.7% to 7.1%). These efforts, together with the completion of the Precinct Master Plan and asset enhancement at China Square Central, are set to enhance FCOT’s performance and position it for further growth ahead, in our view.
Maintain BUY
On the capital management front, we note that FCOT’s average borrowing rate has also improved from 4.0% in 3QFY12 to 2.8% after refinancing its loans over the past year (2Q: 3.2%). In addition, FCOT shared that 51.0% of its borrowings are hedged into fixed rates, which should provide some certainty to its financing costs. However, gearing has crept up to 39.5% from 31.7% after the CPPU redemption, thus possibly posting some restriction to its financial flexibility. We leave our forecasts largely unchanged, but revise our fair value from S$1.60 to S$1.58 due to a marginally higher risk free rate. Maintain BUY.
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