SINGAPORE (July 25): CIMB continues to rate Frasers Commercial Trust (FCOT) at “hold” with a higher target price of $1.45 from $1.39 previously after its manager reported a 3Q distribution per unit (DPU) of 2.4 cents, in line with the research house’s expectations.
See: Frasers Commercial Trust declares lower 3Q DPU of 2.4 cents
In a Tuesday report, analysts Lock Mun Yee and Yeo Zhi Bin share that they have tweaked their long-term blended Singapore/Australia growth rate estimates to 1.9% from 1.5% previously on slight growth assumptions for both Singapore on the back of an anticipated office cycle recovery, as well as Australia due to in-built step-ups.
They also believe the total return to be modest, at 8%.
Looking back on FCOT’s 3Q results, the analysts note the trust’s robust balance sheet as well as a slight q-o-q improvement its portfolio occupancy by 0.8% to 92.6% as at 3Q, which has more than offset the decline in its Australian portfolio take-up at 94.4%.
They also point out that another 8.2% and 30.9% of leases are expiring in 4QFY17 and FY18, respectively, with the bulk of FY17 lease renewals at ATP – including its Hewlett-Packard (HP) lease, of which 5.6% expiries in 4Q.
Another 12.6% of the HP lease, comprising HP Enterprise and HP Singapore, is due to be renewed in FY18.
“No updated details on [HP lease] have been given, although the manager continues to be active in tenant engagement. In the meantime, the trust is undertaking a $45 million upgrading and repositioning of the property,” add the analysts.
“Upside risk is faster-than-expected ramp-up of portfolio occupancy and downside risk is potential reduction in leased area by HP.”
As at 9.31am, units of FCOT are down by 1 cent at $1.42.
