Frasers Commercial Trust

Frasers Commercial Trust (FCOT): 3QFY13 results in line as DPU increased 28.8% to 2.17¢ due to the redemption of CPPU holders and reduction in interest expenses. Gross revenue dipped 16.1% y/y to $30.0m and NPI declined 13.4% to $23.1m due to divestment of KeyPoint and its Japanese properties and the weaker AUD. Overall portfolio occupancy of 98.1% and weighted average lease to expiry of 4.6 years. High leverage of 39.5% with average cost of debt at 1.9%, estimated to drop to 1.5% after issuing its new one-year debt. Stanchart see potential positive rental reversions at Alexandra Technopark, when its master lease expires in Aug 2014. Stanchart expect FCOT could look to acquire its sponsor's office assets, Alexandra Point and Valley Point, but it would require equity raising to keep leverage below 40%. However, Stanchart expect AUD to weaken a further 3% p.a. through to 2016. As Australian properties contribute ~52% of FCOT's income, earnings will be impacted severely. FCOT's portfolio valuation has declined 2.5% q/q and Stanchart estimate a 15% decline in the AUD to result in a ~8% decline in FCOT's NAV. FCOT trades at 0.91x P/NAV and 5.7% 3QFY13 annualized yield. Stanchart has an UNDERPERFORM rating with TP of $1.25.