• FRASERS COMMERCIAL TRUST (SGX:ND8U)'s 4Q DPU of 2.4 Scts and FY9/19 of 9.6 Scts were in line with our projection.
• Committed occupancy continued to improve q-o-q with higher take-up at Alexandra Technopark and Central Park.
• Maintain ADD with an unchanged DDM-based Target Price of S$1.71.

FCOT's 4QFY9/19 Results in Line

• FRASERS COMMERCIAL TRUST (SGX:ND8U) recorded 4QFY9/19 revenue and net property income of S$32.9m and S$21.7m, +1% y-o-y, respectively, on higher straight-lining income and lower utilities expenses at Alexandra Technopark as well as higher occupancy at Central Park in Perth and higher income from China Square Central. See Frasers Commercial Trust Announcements.
• Distribution income was up 2% y-o-y, thanks to increased contributions from Farnborough Business Park and higher capital distributions.
• 4Q DPU stayed flat at 2.4 Scts. FY9/19 DPU of 9.6 Scts was in line at 99.6% of our full-year forecast. See Frasers Commercial Trust Dividend History.
• Frasers Commercial Trust also revalued up its portfolio by 4.4% at end-FY19, boosting book NAV to S$1.61/unit.

Portfolio Committed Occupancy Continued to Tick Up

• Committed portfolio occupancy improved to 95% at end-4Q (vs. 94.1% in 3Q).
• Since the completion of the AEI at Alexandra Technopark, the property has benefited from increased leasing interest, with Google committing to rent 344,100sqf of space at the property. Despite Microsoft giving up its space at the property in Jan 2020, Frasers Commercial Trust has managed to secure commitments for 72% of the area and the balance are in advance discussions with prospective tenants. In addition, signing rents at Alexandra Technopark have also continued to trend up.

CSC Retail to Commence Operations From Nov 2019

• Meanwhile, at China Square Central (CSC), the new Capri by Fraser China Square hotel commenced operations in May this year, which should increase footfall and vibrancy at China Square Central. The retail component has obtained Temporary Occupation Permit (TOP) in 4QFY19 and tenant fit-out works are in progress.
• Business operations are expected to commence progressively in phases from Nov 2019 onwards. About 80% of the expanded 80,000 sq ft of retail space has been pre-committed, with another 10% in active negotiations.

Low Gearing, Deep Debt Headroom Capacity

• Frasers Commercial Trust’s balance sheet is robust, with gearing of 28.6%, the lowest amongst its office SREIT peers. With significant debt headroom, Frasers Commercial Trust is well-positioned to tap into potential inorganic growth opportunities, especially in the UK and Australia.

Maintain ADD

• We tweak down our FY20-21F DPU estimates marginally post results and introduce our FY22 forecast. Accordingly, our DDM-based Target Price remains unchanged at S$1.71 with our ADD rating retained. See Frasers Commercial Trust Share Price.
• With Alexandra Technopark now largely back-filled, share price catalysts would be new acquisitions, especially in Australia and the UK.
• Downside risks include slower office on the back of a weaker macro outlook.

Source: CGS-CIMB Research - 22 Oct 2019