Frasers Commercial Trust in focus

frasers commercial trust

 “Buy.  FCOT offers an attractive yield of >7.6%, which is compelling given limited downside risks, in our view.

 

ALP REIT INVESTMENT CLUB

Frasers Commercial Trust (ND8U)

(15May2016) close: S$1.28

12M-Target price: S$1.401

1.) Type of Reit: Office Reit

2.) Number of property in the portfolio: As at 30 September 2015, its portfolio consists of six quality office and business space buildings located in Singapore and Australia with a combined appraised value of approximately S$2.0 billion.

3.) Countries that the business operates in: Singapore and Australia.

geogrphial

Singapore and Australia properties

 

4.) Top 5 properties that generates the highest revenue (Decreasing order): Alexandra Technopark (35.7%), China Square Central (20.5%), Central Park (20.2%), Caroline Chisholm Centre (17.6%), 55 Market Street ( 4.2%) and 357 Collins Street* (1.8%).

*For the period from 18 August 2015 being the date of acquisition of 357 Collins Street to 30 September 2015. (Take Note)

5.) Challenges: Average occupancy rates has declined from 96.5% in previous year to 95.4% in 2015. As Frasers Commercial Trust derives around 45% of its income from AUD while distributions are based in SGD, foreign currency fluctuations will have an impact on distributions. The Manager has hedged out its AUD exposures on a 6- to 9-month rolling basis.

occupany FCT

Average occupancy rates

 

6.) Strengths: To manage the exposure to the weaker Australian dollar, the anticipated net cash flows from the Australian properties have been hedged and a portion of the investment in the Australian assets is hedged normally through Australian dollar denominated borrowings.

7.) Significant events: In FY2015, The Reit acquired 357 Collins Street, an office building with Grade A specifications located in the heart of the Melbourne Central Business District. This yield accretive acquisition is poised to strengthen the portfolio and provide longer term growth to distributable income of the Trust.

In recognition of its good corporate governance practice, FCOT was awarded the runner-up in the Singapore Corporate Governance Award under the REiTs and business Trusts category by the Securities investors Association Singapore (SiAS) at the 16th SiAS investors’ Choice Awards 2015. This is the third consecutive year that FCOT has won this award.

 8.) TABLE:

fct data 

9.) Recommendation: Buy.  FCOT offers an attractive yield of >7.6%, which is compelling given limited downside risks, in our view. We believe that its portfolio of mainly Grade B office assets and business parks has proven itself and will weather the current downturn in CBD rents over FY16-17. Moreover, the properties in Singapore can expect to see positive rental reversions as the average passing rents for the expiring leases are lower than market rents. 357 Collins Street will make its full year contribution from 2016 onwards and this yield accretive acquisition is poised to strengthen the portfolio and FCOT’s distribution in the longer term.

 

 COMPILED BY: Germaine

DISCLAMER: Readers should not rely solely on information published and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

 

Frasers Commercial Trust Headlines

Print Friendly
Visited 177 times

Leave a Comment