Frasers Commercial Trust

Frasers Commercial Trust: Frasers Commercial Trust (FCOT) 2QFY14 results were largely in line, with distributable income of $13.8m (+5.6%) and DPU at 2.05¢ (+3%), taking 1H14 DPU to 4.1¢ (+15%). Gross revenue and net property income (NPI) fell 3.7% and 5.8% to $28.6m and $21.7m respectively, mainly due to the weaker Australian dollar and the lower occupancy for Central Park. This was however offset by higher gross revenue from the REIT’s Singapore properties (+4.2%), mainly due to higher occupancy and rental rates achieved by Central Square Central. Despite the lower gross revenue and NPI, the higher DPU was a result of higher distributable income arising from savings in the CPPU distribution. Overall, FCOT’s portfolio occupancy as at 31 Mar ‘14 stood at a strong 97.5% with a healthy weighed average lease to expiry (WALE) of 4.1 years and a fairly stable aggregate leverage of 37.8%. Going forward, FCOT expects China Square Central to continue benefitting from the Precinct Master Plan, asset enhancement initiatives and the Telok Ayer MRT station on the Downtown Line which opened in Dec ‘13. The expiry of the master lease at Alexandra Technopark in Aug ‘14 will also provide the Trust with stronger growth going forward. FCOT will also be implementing the distribution reinvestment plan (DRP) for 2QFY14, which will provide unitholders the option to receive their distributions either in the form of Units or cash or a combination of both. This will enable the Trust to enlarge its capital base, strengthen its working capital reserves and improve liquidity. At the current price, FCOT trades at an annualized FY14 yield of 6.4% and 0.83x P/B versus its commercial peers average of 6.3% yield and 0.85x P/B. Latest broker ratings as follows: CIMB maintains Add with TP $1.39 OCBC maintains Buy with TP $1.45