Fraser Commercial Trust

Fraser Commercial Trust: FCOT will acquire the remaining 50% interest in Caroline Chisholm Centre (CTL), which it does not already own for AU$83.0m or S$106m. The price is 12.6% below the valuation. Including stamp fees and other professional fees, the acquisition cost AU$89.6m or $114m.

Grade 'A' property in Aus will enhance portfolio quality. Completed in 2007, the property is a five-storey Grade ‘A’ office building in Canberra. This acquisition will increase FCOT exposure to Australia from 25% to 30% of total asset value. It is also in line with management’s strategy to increase its exposure in SG and Aus as well as divest its Jap asset when opportunities arise.

Trust is expected to finance this acquisition by debt and internal funds. The trust has a current cash balance of $87m. Assuming fully debt-funded, the acquisition will raise its gearing ratio to 40%.

Overall, DBSV maintains BUY at a higher TP of $1.14. Add that acquisition is yield accretive with NPI yield of 9.5% vs interest cost of 6%. Like FCOT for taking proactive steps to enhance their portfolio. More asset enhancement and capital management exercises are expected to enhance DPU.