Frasers Commercial Trust (FCOT) delivered 1QFY13 DPU of 1.5832 S cents, up 4.6% YoY. This is congruent with our expectations, as the DPU met 22.2% of our full-year projection. Portfolio occupancy remained stable at 94.6% compared to 4QFY12 occupancy of 94.9%. For the rest of FY13, we note that 13.7% of its leases are due for renewal, with China Square Central (CSC) forming the bulk of lease expiry (8% of total income). As the average passing rent at CSC is lower than the spot market rents, we believe positive rental reversions may be achieved upon renewal. Going forward, we maintain our view that FCOT’s DPU will get further uplift going forward as it benefits from lower funding costs post refinancing of its debts and partial redemption of its CPPUs. We maintain BUY on FCOT with a higher fair value of S$1.48 (S$1.31 previously).
Consistent 1QFY13 showing
Frasers Commercial Trust (FCOT) released its 1QFY13 results last Friday. NPI fell by 6.9% YoY to S$22.9m due mainly to the disposal of KeyPoint and three properties in Japan. However, higher contribution from additional 50% interest in Caroline Chisholm Centre and lower interest costs helped to offset the loss of income from the divestments. As a result, distributable income and DPU grew by 6.9% and 4.6% YoY to S$10.3m and 1.5832 S cents respectively. The results were congruent with our expectations, as NPI and DPU met 25.2% and 22.2% of our respective full-year projections.
Healthy portfolio performance
Australia properties surpassed Singapore properties as the biggest income driver in 1Q, contributing 53.7% to NPI (Singapore: 45.1%). Portfolio occupancy remained stable at 94.6% compared to 4QFY12 occupancy of 94.9%. ~95k sqft of space was contracted, reflecting healthy tenancy activities within the office space. For the rest of FY13, we note that 13.7% of its leases (by gross rental income) are due for renewal, with China Square Central (CSC) forming the bulk of lease expiry (8% of total income). As the average passing rent at CSC (S$6.20 psf pm) is lower than the spot market rents, we believe positive rental reversions may be achieved upon renewal.
Further improvements expected; maintain BUY
Management updated that the Precinct Master Plan initiatives and asset enhancement works for CSC office tower are on track for completion and are expected to rejuvenate the area and make CSC an even more attractive office accommodation. FCOT now boasts a healthy gearing of 29.2% and improved financing costs of 3.3% (3.5% in 4QFY12) following the partial prepayment and refinancing of its debts. Together with the successful 47.6% redemption of CPPUs on 2 Jan, we maintain our view that FCOT’s DPU will get further uplift going forward. We keep our forecasts unchanged but bump up our fair value to S$1.48 from S$1.31 on lower cost of equity of 7.0% (7.8% previously) as we factor in an anticipated increase in investor risk appetite and the current low interest rate environment. Maintain BUY.
Frasers Commercial Trust (FCOT) released its 1QFY13 results last Friday. NPI fell by 6.9% YoY to S$22.9m due mainly to the disposal of KeyPoint and three properties in Japan. However, higher contribution from additional 50% interest in Caroline Chisholm Centre and lower interest costs helped to offset the loss of income from the divestments. As a result, distributable income and DPU grew by 6.9% and 4.6% YoY to S$10.3m and 1.5832 S cents respectively. The results were congruent with our expectations, as NPI and DPU met 25.2% and 22.2% of our respective full-year projections.
Healthy portfolio performance
Australia properties surpassed Singapore properties as the biggest income driver in 1Q, contributing 53.7% to NPI (Singapore: 45.1%). Portfolio occupancy remained stable at 94.6% compared to 4QFY12 occupancy of 94.9%. ~95k sqft of space was contracted, reflecting healthy tenancy activities within the office space. For the rest of FY13, we note that 13.7% of its leases (by gross rental income) are due for renewal, with China Square Central (CSC) forming the bulk of lease expiry (8% of total income). As the average passing rent at CSC (S$6.20 psf pm) is lower than the spot market rents, we believe positive rental reversions may be achieved upon renewal.
Further improvements expected; maintain BUY
Management updated that the Precinct Master Plan initiatives and asset enhancement works for CSC office tower are on track for completion and are expected to rejuvenate the area and make CSC an even more attractive office accommodation. FCOT now boasts a healthy gearing of 29.2% and improved financing costs of 3.3% (3.5% in 4QFY12) following the partial prepayment and refinancing of its debts. Together with the successful 47.6% redemption of CPPUs on 2 Jan, we maintain our view that FCOT’s DPU will get further uplift going forward. We keep our forecasts unchanged but bump up our fair value to S$1.48 from S$1.31 on lower cost of equity of 7.0% (7.8% previously) as we factor in an anticipated increase in investor risk appetite and the current low interest rate environment. Maintain BUY.
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