Frasers Commercial Trust’s (FCOT) 2QFY19 scorecard was within our expectations. Gross revenue dropped 7.9% YoY to S$33.0m, on the back of lower occupancy at Alexandra Technopark, divestment of 55 Market Street (31 Aug 18) and the effects of the average weaker Australian Dollar. Still, top-line was somewhat buffered by higher rents achieved at China Square Central and a one-off lease termination payment received at 357 Collins Street.

NPI took a corresponding hit, falling 10.5% YoY to S$22.4m. Distributable income rose 5.2% YoY to S$20.6m, due to contribution from Farnborough Business Park, distribution from capital returns (~S$4.9m) and the effects of management fees taken in units. DPU for 2QFY19 came in at 2.4 Scents, representing 25.0% of our full-year forecast.

We believe FCOT’s balance sheet remains healthy, with its gearing level of 29.1% allowing it room for further acquisitions. We maintain our BUY rating but place our FV of S$1.56 under review.

Source: OCBC Research - 23 Apr 2019