Frasers Commercial Trust’s (FCOT) 3QFY17 results came in broadly within our expectations. Gross revenue and NPI fell 0.6% and 0.8% YoY to S$38.3m and S$27.9m, respectively, while DPU dropped 0.4% YoY to 2.40 S cents.

The better performance by FCOT’s Australian portfolio on the back of a stronger AUD was offset by lower occupancy rates at Alexandra Technopark, China Square Central and Central Park.

Notwithstanding the above, on a 9MFY17 basis, gross revenue and NPI both rose by 0.9% YoY to S$118.2m and S$87.1m, respectively. DPU improved by 0.5% YoY to 7.41 S-cents, forming 74.9% of our FY17 forecast.

Looking ahead, we see signs of stabilisation in the Singapore office sector, while business park rents continue to hold their ground. In Australia, the Perth prime grade rents appear to be approaching a trough, while Melbourne’s CBD office market continues to remain strong.

Pending further details from management, especially on developments relating to the upcoming Hewlett-Packard tenancy expiries, we put our BUY rating and fair value estimate of S$1.39 under review.

Source: OCBC Research - 25 Jul 2017