Summary: Frasers Commercial Trust (FCOT) started FY15 on a bright note, with 1QFY15 revenue and DPU increasing by 23.3% and 20.0% YoY to S$35.5m and 2.46 S cents, respectively. This was within our expectations, as the former and latter formed 25.6% and 26.0% of our full-year forecasts, respectively.

The strong set of results was driven by higher income contribution from the underlying leases of Alexandra Technopark (NPI +66.2% YoY) following the expiry of the master lease in Aug 2014 and higher occupancy and rental rates at China Square Central and 55 Market Street. This was partially offset by softness in its Australian properties.

Portfolio occupancy stood at 96.6%, relatively stable from the 96.5% achieved in 4QFY14. Management has hedged 73% of its total borrowings. We will provide more details after speaking with management, and will review our BUY rating and S$1.50 fair value estimate thereafter.

Source: OCBC Research - 25 Jan 2015