Frasers Commercial Trust’s (FCOT) 2QFY13 DPU came in at 1.9883 S cents, representing a 14.4% YoY growth. This is slightly above our expectations, as 1HFY13 DPU of 3.5715 S cents already formed 51.4% of our full-year DPU forecast. Key rental growth drivers for the quarter came from FCOT’s Australia properties. As at 31 Mar, the portfolio occupancy remained strong at 95.3%, with weighted average lease to expiry at 4.8 years. Looking ahead, we hold our view that FCOT will continue to perform strongly. While the actual occupancy at China Square Central stood at 73.0%, a high committed occupancy of 92.6% was secured. The passing rents for several of its properties are also below the market rates, thus presenting potential for rental upside. In addition, the redemption of another 157.1m CPPUs in Apr is likely to provide further uplift in DPU. We maintain our BUY rating with a higher fair value of S$1.66 (S$1.52 previously) on FCOT.
Strong uplift in DPU
Frasers Commercial Trust (FCOT) turned in a strong set of 2QFY13 results. While NPI fell 7.0% YoY to S$23.0m due to loss of income from the divestment of KeyPoint and Japan properties, distributable income grew 16.8% to S$13.1m on lower interest expenses and distribution savings following the redemption of its Series A Convertible Perpetual Preferred Units (CPPUs). Consequently, DPU for the quarter came in at 1.9883 S cents, representing a 14.4% YoY growth. This is slightly above our expectations, as 1HFY13 DPU of 3.5715 S cents already formed 51.4% of our full-year DPU forecast.
Robust demand for its properties
Key rental growth drivers for the quarter came from FCOT’s Australia properties. Notably, Caroline Chisholm Centre registered a 101.0% YoY jump in NPI post acquisition of the remaining 50% interest in the property. In addition, Central Park saw its NPI increase by 6.4% on the back of higher secured rentals. As a result, Australia properties contributed 54.2% of 2Q NPI, up from 37.4% a year ago (prior to divestments). As at 31 Mar, the portfolio occupancy remained strong at 95.3% (1Q: 94.7%), with weighted average lease to expiry at 4.8 years (1Q: 4.9 years). Positive rental reversions ranging from 8-87% for leases commenced during the quarter were also achieved – a strong indication of demand for its properties, in our view.
Maintain BUY with higher S$1.66 FV
Looking ahead, we hold our view that FCOT will continue to perform strongly. While the actual occupancy at China Square Central stood at 73.0%, a high committed occupancy of 92.6% was secured. This is expected to contribute positively to the rental income in the coming quarters. The passing rents for several of its properties are also below the market rates, thus presenting potential for rental upside (especially when Alexandra Technopark master lease expires in Aug 2014). Moreover, the redemption of another 157.1m CPPUs in Apr is likely to provide further uplift in DPU. We now incorporate the better results into our forecasts and tweak our CAPM assumptions. Our fair value is raised to S$1.66 from S$1.52 previously. Maintain BUY.
Frasers Commercial Trust (FCOT) turned in a strong set of 2QFY13 results. While NPI fell 7.0% YoY to S$23.0m due to loss of income from the divestment of KeyPoint and Japan properties, distributable income grew 16.8% to S$13.1m on lower interest expenses and distribution savings following the redemption of its Series A Convertible Perpetual Preferred Units (CPPUs). Consequently, DPU for the quarter came in at 1.9883 S cents, representing a 14.4% YoY growth. This is slightly above our expectations, as 1HFY13 DPU of 3.5715 S cents already formed 51.4% of our full-year DPU forecast.
Robust demand for its properties
Key rental growth drivers for the quarter came from FCOT’s Australia properties. Notably, Caroline Chisholm Centre registered a 101.0% YoY jump in NPI post acquisition of the remaining 50% interest in the property. In addition, Central Park saw its NPI increase by 6.4% on the back of higher secured rentals. As a result, Australia properties contributed 54.2% of 2Q NPI, up from 37.4% a year ago (prior to divestments). As at 31 Mar, the portfolio occupancy remained strong at 95.3% (1Q: 94.7%), with weighted average lease to expiry at 4.8 years (1Q: 4.9 years). Positive rental reversions ranging from 8-87% for leases commenced during the quarter were also achieved – a strong indication of demand for its properties, in our view.
Maintain BUY with higher S$1.66 FV
Looking ahead, we hold our view that FCOT will continue to perform strongly. While the actual occupancy at China Square Central stood at 73.0%, a high committed occupancy of 92.6% was secured. This is expected to contribute positively to the rental income in the coming quarters. The passing rents for several of its properties are also below the market rates, thus presenting potential for rental upside (especially when Alexandra Technopark master lease expires in Aug 2014). Moreover, the redemption of another 157.1m CPPUs in Apr is likely to provide further uplift in DPU. We now incorporate the better results into our forecasts and tweak our CAPM assumptions. Our fair value is raised to S$1.66 from S$1.52 previously. Maintain BUY.
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