Frasers Commercial Trust (FCOT) announced its 4QFY14 results which came in within our expectations. Gross revenue grew 10.5% YoY to S$31.8m, while DPU of 2.21 S cents represented an increase of 6.2%. This was driven by higher rental contribution from the underlying leases following the expiry of the master lease at Alexandra Technopark, coupled with improved occupancy and rental rates at China Square Central. For FY14, revenue inched up 0.5% to S$118.8m, forming 96.8% of our full-year forecast. DPU grew 8.7% to 8.51 S cents and was spot on with our estimate of 8.5 S cents, due largely to lower-than-expected finance costs.

FCOT managed to achieve positive weighted average rental reversions of 6.0%-18.4% and 13.7%-21.4% for 4QFY14 and FY14, respectively. Its portfolio valuation increased slightly by 0.7% from S$1,811.4m (as at 30 Sep 2013) to S$1,824.9m (as at 30 Sep 2014), as the gain in valuation of its Singapore properties was partially offset by the decline in valuation of its Australia assets (partly due to weaker AUD). We maintain our BUY rating on FCOT but our S$1.48 fair value estimate is under review pending an analyst briefing.

Source: OCBC Research - 21 Oct 2014