Wednesday, June 27, 2012
FCOT: EGM scheduled for 12 Jul, with FCOT to seek unitholders’ approval for i) selling Keypoint for $360m, and ii) a unit buyback mandate of up to 3.5% of its share capital. StanChart estimates that a 3.5% unit buyback could be ~2.3% accretive for FY13e DPU. Sees hidden value in FCOT, including further unit buybacks given 8.7% DPU yield in FY13e vs funding cost of 3.3%. The house continues to like FCOT’s strategic mgr who has been pro-active in capital mgt and has shown alignment of interest with unitholders. Reiterates Outperform with TP $1.27. Additionally, KELive notes that FCOT has outstanding convertible perpetual preference units (CPPU), with conversion price of $1.1845. There is market talk that FCOT will likely (partially) redeem the CPPU’s which have a lower cost (CPPU coupon of 5.5%) vs the StanChart’s est. 7.2% div yield in FY12e. With the CPPUs trading close to par, CPPU holders who wish to maintain yield exposure may seek to invest in FCOT units directly. FCOT is +2% at $1.02, breaking above the psychological $1 resistance level, and at a multi year high.