Frasers Commercial Trust (FCOT) announced that it has launched a private placement exercise of 84m new units at an issue price of between S$1.46 to S$1.48. This is unsurprising, as FCOT had stated its intention to carry out such an exercise in its circular, which was published on 3 Jun 2015. FCOT had subsequently obtained approval from unitholders for this at an EGM last month.

Depending on market conditions, FCOT may increase the size of its private placement exercise by up to an additional 12m new units. The issue price represents a discount of 4.9%-3.6% to its last closing price. Gross proceeds of up to S$142.1m will be raised, of which S$122.7m will be utilized to partially finance its proposed A$237.7m acquisition of an office building (357 Collins Street) in Melbourne from its sponsor (unitholders’ approval also obtained).

Based on FCOT’s projections, the transactions are expected to raise its 4QFY15 DPU by ~0.8%. We maintain our BUY rating and S$1.65 fair value on the stock.

Source: OCBC Research - 24 Jul 2015