Frasers Commercial Trust (FCOT) reported its 4QFY16 results this morning which met our expectations. Gross revenue and NPI grew 5.7% and 6.9% YoY to S$39.3m and S$29.3m, respectively, but DPU declined 2.8% to 2.45 S cents. For FY16, FCOT’s gross revenue jumped 10.1% to S$156.5m; NPI rose 13.5% to S$115.6m and this accounted for 100.3% of our forecast. DPU of 9.82 S cents represented growth of 1.1% and formed 99.7% of our projection.

On a portfolio basis, FCOT’s occupancy was relatively stable at 93.0% (-0.3 ppt QoQ). Management achieved positive rental reversions across its Singapore assets in 4QFY16, with rental uplifts of 3.7%, 5.3% and 9.5% coming in at China Square Central, 55 Market Street and Alexandra Technopark, respectively.

For Australia, Central Park had a negative rental reversion of 4.2% (for office space representing 1.4% of the property’s NLA), while 357 Collins Street saw a positive rental reversion of 6.2%. We will provide more details after the analyst briefing. Maintain BUY on FCOT but we will be reviewing our S$1.45 fair value estimate.

Source: OCBC Research - 20 Oct 2016