Completion of sale of KeyPoint
Frasers Commercial Trust (FCOT) announced on 28 Sep that it had
completed the sale of KeyPoint to Bayfront Ventures Pte Ltd for
S$360.0m. With the divestment, FCOT is likely to sit on a hefty net
proceeds of S$357.8m (after professional and related expenses
relating to the sale) and book in a gain of S$72.8m. We are
maintaining our view that FCOT will likely use the bulk of the sale
proceeds to redeem half of its Series A Convertible Perpetual
Preferred Units (CPPUs) and reduce its existing debt liabilities. This is
because the funding costs (distribution rate) of the CPPUs and its
gearing ratio are relatively high at 5.5% and 39.5% respectively.
Based on our understanding, the CPPUs are only redeemable on the
first business day of each calendar quarter. Hence, the earliest period
FCOT will be able to make the redemption and relieve the drag on its
distributable income is in the Dec quarter.
Expecting enhanced performance
Going forward, we are staying positive on FCOT’s financial
performance. Apart from a positive impact from the likely redemption
of the CPPUs, FCOT is also expected to gain from interest savings as a
result of the early refinancing of its S$500m term loan facility at
favourable borrowing margins. In addition, the acquisition of the
balance 50% interest in Caroline Chisholm Centre and direct tenant
leases at China Square Central (CCC) earlier this year are likely to
contribute positively to its rental income. Hence, we expect FCOT to
meet our FY12-13 forecasts comfortably.
Maintain BUY
We continue to like FCOT for its growth potential, strong execution
and attractive P/B of 0.87x. We are holding our FY12-13 forecasts
intact as the recent developments are in line with our expectations.
However, as we roll our valuations to FY13, our fair value is now
raised from S$1.23 to S$1.31. Maintain BUY.
STRONG VALUE PROPOSITION
• Likely redemption of CPPUs
• Expecting uplift in income
• Fair value estimate raised
9 Oct 2012
Company Update
FRASERS COMMERCIAL TRUST | BUY
Asia Pacific Equity Research
Singapore | REITs
BUY (maintain)
Fair value S$1.31
add: 12m dividend forecast S$0.08
versus: Current price S$1.16
12m total return forecast 20%
Analysts
Kevin Tan (Lead) C +65 6531 9810
Eli Lee C +65 6531 9112
Key information
Market cap. (m) S$744.5 /
USD604.9
Avg daily turnover (m) S$0.7 /
USD0.6
Avg daily vol. (m) 0.8
52-wk range (S$) 0.73 - 1.18
Free float (%) 73.0
Shares o/s. (m) 644.6
Exchange SGX
BBRG ticker FCOT SP
Reuters ticker FRCR.SI
ISIN code A48U
GICS Sector Financials
GICS Industry REITs
Top shareholder F&N - 27.0%
Relative total return 1m 3m 12m
Company (%) -2 11 62
STI-adjusted (%) -4 6 42
Price performance chart
0.70
0.84
0.98
1.12
1.26
1.40
Oct-11 Jan-12 Apr -12 Jul -12 Oct-12
2400
2920
3440
3960
4480
5000
Fair Value FCOT SP FSSTI
Shar e Pr ice (S$) Index Level
`
Sources: Bloomberg, OIR estimates
Industry-relative metrics
0th 25th 50th 75th 100th
PB
PE
ROE
Beta
Mkt Cap
Company Indust r y Aver age
Per cent i l e
Note: Industry universe defined as companies under identical GICS classification
listed on the same exchange.
Sources: Bloomberg, OIR estimates
Key financial highlights
Year Ended 30 Sep (S$ m) FY10 FY11 FY12F FY13F
Gross revenue 117.9 119.6 130.1 126.3
Total property expenses -24.9 -23.6 -26.3 -29.4
Net property income 93.0 96.0 103.8 96.9
Amount available for distribution 34.5 36.3 43.1 51.2
DPU per share (S cents) 5.6 5.8 6.7 7.9
Cons. DPU (S cents) na na 6.8 7.7
PER (x) 20.7 16.3 6.4 17.1
P/NAV (x) 4.2 0.8 0.8 0.8
ROE (%) 5.9 7.5 12.6 4.6
Gearing (%) 38.3 36.0 36.5 36.4
Please refer to important disclosures at the back of this document. MICA (P) 035/06/2012
MARKET CAP: USD 604.9M AVG DAILY TURNOVER: USD 0.6M