Frasers Commercial Trust (FCOT) yesterday announced the proposed acquisition of the remaining 50% interest in Caroline Chisholm Centre (CTL) for AUD83.0m (S$112.6m). We are positive on the investment as it is likely to enhance FCOT’s portfolio lease expiry profile and provide stability in income growth. Assuming the acquisition was financed by bank borrowings and internal funds, management guided that it is expected to add 0.32 S cents or 5.6% to its DPU. Our DDM based fair value is now lifted to S$0.94 from S$0.87 previously, after factoring in the acquisition. Maintain BUY on FCOT.
Details of acquisition. Frasers Commercial Trust (FCOT) yesterday announced the proposed acquisition of the remaining 50% interest in Caroline Chisholm Centre (CTL) for AUD83.0m (S$112.6m). The purchase consideration was at a 12.6% discount to the last valuation of AUD95.0m (S$121.3m) of its existing 50% stake in the property, carried out on 30 Sep 2011. Management intends to finance the acquisition via bank borrowings and internal funds.
Benefits likely from investment. We are positive on the acquisition as CTL is fully leased to the Commonwealth Government of Australia, represented by Centrelink, with a balance lease of ~13.5 years and 3.0% annual rent increment. This will likely enhance FCOT’s portfolio lease expiry profile and provide stability in income growth. According to management, the portfolio weighted average lease to expiry is expected to improve from 3.4 years (31 Dec 2011) to 4.4 years, while the percentage income from master leases and blue-chip tenants is likely to increase from 43.1% to 48.3%. We also believe the move will give FCOT greater control and flexibility as the group will own the entire property upon completion of the transaction.
Maintain BUY. Based on FY11 NPI of AUD8.5m (S$10.9m) and valuation of FCOT’s present interest in CTL, we note that NPI yield of the property was at 8.9%. This compares favorably to the FY11 implied portfolio NPI yield of 4.9%. Assuming the acquisition was financed by bank borrowings and internal funds, management guided that it is expected to add 0.32 S cents or 5.6% to its DPU. In our view, FCOT appears poised to produce a good set of performance in the current financial year, given the better expected rental terms on China Square Central, potential interest savings from refinancing and current investment. Our DDM based fair value is now lifted to S$0.94 from S$0.87 previously, after factoring in the acquisition. Maintain BUY on FCOT.
Benefits likely from investment. We are positive on the acquisition as CTL is fully leased to the Commonwealth Government of Australia, represented by Centrelink, with a balance lease of ~13.5 years and 3.0% annual rent increment. This will likely enhance FCOT’s portfolio lease expiry profile and provide stability in income growth. According to management, the portfolio weighted average lease to expiry is expected to improve from 3.4 years (31 Dec 2011) to 4.4 years, while the percentage income from master leases and blue-chip tenants is likely to increase from 43.1% to 48.3%. We also believe the move will give FCOT greater control and flexibility as the group will own the entire property upon completion of the transaction.
Maintain BUY. Based on FY11 NPI of AUD8.5m (S$10.9m) and valuation of FCOT’s present interest in CTL, we note that NPI yield of the property was at 8.9%. This compares favorably to the FY11 implied portfolio NPI yield of 4.9%. Assuming the acquisition was financed by bank borrowings and internal funds, management guided that it is expected to add 0.32 S cents or 5.6% to its DPU. In our view, FCOT appears poised to produce a good set of performance in the current financial year, given the better expected rental terms on China Square Central, potential interest savings from refinancing and current investment. Our DDM based fair value is now lifted to S$0.94 from S$0.87 previously, after factoring in the acquisition. Maintain BUY on FCOT.
No comments:
Post a Comment