Frasers Commercial Trust

Frasers Commercial Trust: CIMB maintains O/p with $1.42 TP. House note that after a series of yield-enhancing activities and portfolio restructuring in FY12, FCOT is in an enviable position as DPU growth is built-in through FY15 and asset leverage of 31% provides it with the financial flexibility to do more. With the recent completion of a 48% CPPU redemption, management has locked in a nice 12% DPU uplift for FY13. Ongoing back-filling and positive rental reversions on its under-rented local office assets should extend DPU growth into FY14. House expect FCOT to relook at hotel redevelopment plans over the next yr, where it could sell the site and redeploy proceeds into accretive CPPU redemption. Mgt is also on the lookout for acquisitions, failing which it still retains the financial flexibility to redeem all its remaining CPPUs for ~10% DPU accretion while keeping asset leverage at levels of 40%. Conclude that with DPU growth of 6-12% over FY13-15, FCOT’s growth visibility is one of the strongest among S-REITs. This is further backed by undemanding valuations (0.9x P/BV and forward yields of 6-7%).