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OCBC Investment Research has lowered its fair value estimate on Frasers Commercial Trust (FCT), even as it maintained a ‘Buy’ rating on the office Reit’s counter, reported Reits Week.
This comes as the share price of FCT lagged both the FTSE ST REIT Index and Singapore’s broader Straits Times Index (STI).
“We believe this could be attributed to lease renewal uncertainties of (the Reit’s) major tenants, two of HP’s entities, at its Alexandra Technopark property,” said the bank.
OCBC noted that these tenants collectively accounted for 17.5 percent of the gross rental income of FCT as at 31 December 2016.
Assuming partial renewal by tenants, the bank is also lowering its occupancy assumption at Alexandra Technopark for FY2018 to 80 percent, from 95 percent previously.
“Our FY2018 DPU forecast is consequently cut by nine percent,” it noted.
But while the revised forecast lowered FCT’s fair value estimate to $1.39 from $1.48, the Reit trades at a forecasted distribution yield of 7.3 percent for FY2018.
“Hence, we believe uncertainties over its (Alexandra) asset have been priced in by the market,” said OCBC.
Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg
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