Frasers Commercial Trust

Frasers Commercial Trust (FCOT): FYSep11 results in line with consensus.
Full yr DPU was 5.75 cts, +5% yoy, as NPI rose 3.2% yoy on the back of higher occupancy rates for Keypoint and 55 Market Street and higher rents from Central Park, Perth.
FCOT also revalued its portfolio by 2% yoy to $1.942b. Spore and Australian asset values rose by 3% yoy, while Japanese assets declined by 6% yoy. Latest NAV was $1.34/unit, translating to 0.6x P/B.

FCOT closed an expression of interest exercise to divest Keypoint on 20 Oct 2011. StanChart expects FCOT to divest Keypoint by Dec 2011, close to the current asset value of $283m, potentially bringing gearing (debt/assets) to 26.3% from its current 36.6%, though the divestment gain itself may not be substantial. The house views the disposal positively, as FCOT would no longer be locked into an asset where it expects rents to fall over the next 4 years.

StanChart notes refinancing alone could provide 15% DPU growth in the next 12 months. Expects the manager to secure new debt at a margin of 190bps (75bps lower than the current 265bps). Also expects the expiry of the master lease at China Square Central to result in positive rental reversion after Mar 2012.

The house maintains Outperform with TP $1.02, with 7% 2012E DPU yield.