Compiled by Navin Sregantan
FRASERS COMMERCIAL TRUST (FCOT) | ADD (UPGRADED)
JUNE 27 CLOSE: $1.68
TARGET PRICE: $1.64
CGS-CIMB, June 26
FCOT announced that it has entered into a lease agreement with Google Asia Pacific for the latter to take up 344,100 sq ft of space at Alexandra Technopark (ATP) for five years commencing in Q1 of CY2020.
The average gross rent is comparable to recent signing rents for the property.
The lease represents a third of the current net lettable area at ATP and would increase the property's committed occupancy to 93.7 per cent.
The transaction highlights the robust office leasing market, given the low new incoming supply this year and next year.
FCOT continues to be in talks with other prospective tenants for the remaining vacant space at ATP, with improved rental pricing power.
We leave our estimated FY2019 distribution per unit (DPU) unchanged but raise our estimated FY2020-2021 DPU by 4.3 per cent to 7.5 per cent to factor in the increased contribution from ATP.
FCOT is trading at 6.1 per cent estimated FY2019 DPU yield, on the higher end of comparable office Reit (real estate investment trust) peers.
Downside risks include slower office appetite on the back of slower macro outlook.
WING TAI HOLDINGS | BUY (MAINTAINED)
JUNE 27 CLOSE: $2.05
FAIR VALUE: $2.41
OCBC Investment Research, June 27
It has been reported that an associate of Wing Tai Holdings is looking at selling its units at Oma Oma in Tuen Mun in Hong Kong at discounted prices.
We believe this would be applicable only in the initial phase, but might look to adjust prices subsequently.
In our view, the benign interest rate outlook and low March-May unemployment rate of 2.8 per cent should help to support the market, despite the macro headwinds.
Separately, Wing Tai has been awarded a prime Middle Road land parcel at a bid of about $492 million, which will be a residential development with commercial uses at the first storey.
In our view, Wing Tai remains in a good position to weather through the obvious residential headwinds in Singapore, given its healthy net cash position, vis-a-vis the average net gearing ratio of 65.8 per cent for the peers we track.
Wing Tai currently trades at a consensus blended forward price-to-book of 0.45 times, which is around 0.7 standard deviations below the 10-year mean.
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