Fraser Commercial Trust (FCOT)

Fraser Commercial Trust (FCOT): 1Q13 results was in-line. NPI at $22.9m, -7% yoy and -13% qoq, while DPU at 1.58c, +5% yoy and -10% qoq. SCB note that FCOT’s price has risen 82% since January 2012, outperforming SREITs by 42% during this period. FCOT offers a 5.2% FY13- 15 DPU CAGR. While this is high compared vs SREIT average of 1.2%, FCOT’s 2013E DPU yield of 5.8% is the lowest among SREITs with market cap below $1b. House tip potential downside from further conversion of preference units: FCOT redeemed 163m of its 342.5m FCOT’s Convertible Perpetual Preferred Units (CPPUs) on 2 Jan13, in line with estimate of 50% redemption. The CPPUs have a conversion price of SGD 1.1845/unit, 13% below FCOT’s current stock price. 2.1% of the CPPUs was converted in the last two qtrs and SCB expect current FCOT unitholders to be diluted if more CPPU holders conversions take place. House estimate 2-5% downside to valuation if a further 8% of CPPU holders convert these CPPUs to FCOT units. Ratings as follow: CIMB maintains OutPerform with $1.49 TP SCB downgrades to UnderPerform with $1.27 TP