Frasers Commercial Trust (FCOT) announced on 28 Sep that it had completed the sale of KeyPoint for S$360.0m. We are maintaining our view that FCOT will likely use the bulk of the sale proceeds to redeem half of its Series A Convertible Perpetual Preferred Units (CPPUs) and reduce its existing debt liabilities, as the funding costs of the CPPUs and its gearing ratio are relatively high. Going forward, we are staying positive on FCOT’s financial performance. Apart from a positive impact from the likely redemption of the CPPUs, FCOT is also expected to gain from interest savings as a result of the early refinancing of its S$500m term loan facility at favourable borrowing margins. In addition, the acquisition of the balance 50% interest in Caroline Chisholm Centre and direct tenant leases at China Square Central earlier this year are likely to contribute positively to its rental income. Hence, we expect FCOT to meet our FY12-13 forecasts comfortably. We are holding our FY12-13 forecasts intact as the recent developments are in line with our expectations. However, as we roll our valuations to FY13, our fair value is now raised from S$1.23 to S$1.31. Maintain BUY.
Completion of sale of KeyPoint
Frasers Commercial Trust (FCOT) announced on 28 Sep that it had completed the sale of KeyPoint to Bayfront Ventures Pte Ltd for S$360.0m. With the divestment, FCOT is likely to sit on a hefty net proceeds of S$357.8m (after professional and related expenses relating to the sale) and book in a gain of S$72.8m. We are maintaining our view that FCOT will likely use the bulk of the sale proceeds to redeem half of its Series A Convertible Perpetual Preferred Units (CPPUs) and reduce its existing debt liabilities. This is because the funding costs (distribution rate) of the CPPUs and its gearing ratio are relatively high at 5.5% and 39.5% respectively. Based on our understanding, the CPPUs are only redeemable on the first business day of each calendar quarter. Hence, the earliest period FCOT will be able to make the redemption and relieve the drag on its distributable income is in the Dec quarter.
Expecting enhanced performance
Going forward, we are staying positive on FCOT’s financial performance. Apart from a positive impact from the likely redemption of the CPPUs, FCOT is also expected to gain from interest savings as a result of the early refinancing of its S$500m term loan facility at favourable borrowing margins. In addition, the acquisition of the balance 50% interest in Caroline Chisholm Centre and direct tenant leases at China Square Central (CCC) earlier this year are likely to contribute positively to its rental income. Hence, we expect FCOT to meet our FY12-13 forecasts comfortably.
Maintain BUY
We continue to like FCOT for its growth potential, strong execution and attractive P/NAV of 0.87x. We are holding our FY12-13 forecasts intact as the recent developments are in line with our expectations. However, as we roll our valuations to FY13, our fair value is now raised from S$1.23 to S$1.31. Maintain BUY.
Frasers Commercial Trust (FCOT) announced on 28 Sep that it had completed the sale of KeyPoint to Bayfront Ventures Pte Ltd for S$360.0m. With the divestment, FCOT is likely to sit on a hefty net proceeds of S$357.8m (after professional and related expenses relating to the sale) and book in a gain of S$72.8m. We are maintaining our view that FCOT will likely use the bulk of the sale proceeds to redeem half of its Series A Convertible Perpetual Preferred Units (CPPUs) and reduce its existing debt liabilities. This is because the funding costs (distribution rate) of the CPPUs and its gearing ratio are relatively high at 5.5% and 39.5% respectively. Based on our understanding, the CPPUs are only redeemable on the first business day of each calendar quarter. Hence, the earliest period FCOT will be able to make the redemption and relieve the drag on its distributable income is in the Dec quarter.
Expecting enhanced performance
Going forward, we are staying positive on FCOT’s financial performance. Apart from a positive impact from the likely redemption of the CPPUs, FCOT is also expected to gain from interest savings as a result of the early refinancing of its S$500m term loan facility at favourable borrowing margins. In addition, the acquisition of the balance 50% interest in Caroline Chisholm Centre and direct tenant leases at China Square Central (CCC) earlier this year are likely to contribute positively to its rental income. Hence, we expect FCOT to meet our FY12-13 forecasts comfortably.
Maintain BUY
We continue to like FCOT for its growth potential, strong execution and attractive P/NAV of 0.87x. We are holding our FY12-13 forecasts intact as the recent developments are in line with our expectations. However, as we roll our valuations to FY13, our fair value is now raised from S$1.23 to S$1.31. Maintain BUY.
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