Frasers Commercial Trust: On accelerated growth mode
Summary: Frasers Commercial Trust (FCOT) has essentially locked in
robust growth for FY14 with lower interest costs and the redemption of
its 321.9m Series A Convertible Perpetual Preferred Units (CPPUs) this
year. In addition, we expect FCOT to gain from its growth initiatives
embarked over the past year. For one, FCOT has completed the Precinct
Master Plan and asset enhancement works for the office tower at China
Square Central, and is likely to benefit from improved occupancy and
higher secured rentals going forward. Moreover, FCOT has successfully
completed the renewal of 511,000 sqft of the underlying leases at
Alexandra Technopark and has achieved positive rental reversion of 17.4%
at the property. According to the latest report by DTZ, we also note
that sequential rental increments were seen within the CBD in 3Q13 on
the back of better occupancy rates. This is consistent with our view
that office leasing activity is likely to remain healthy. We maintain
our BUY rating on FCOT with a revised fair value of S$1.45 (S$1.58
previously). (Kevin Tan)
MORE REPORTS
SATS Ltd: Cruise control
Summary: SATS will acquire Singapore Cruise Centre (SCC) from Temasek
for S$110m. This acquisition will complement SATS's existing cruise
services at the Marina Bay Cruise Centre, and give it control of the
ferry terminals at Tanah Merah, Pasir Panjang, and HabourFront Centre,
which has an anchor client in the form of the popular Star Cruises. We
view the deal favourably as it is cash generative (SCC had revenue of
S$45m and PBT of S$16.7m in FY13), should enhance SAT’s FY14F EPS by at
least 5%, and will provide growth opportunities for its gateway and food
solution businesses. We raise our fair value estimate to S$3.35 (S$3.10
previously) but maintain our HOLD rating on the counter as we foresee
limited upside at this point. (Lim Siyi)
CapitaLand Limited: A strong launch at Sky Vue
Summary: Over the weekend, CapitaLand (CAPL) launched the 694-unit Sky
Vue condominium project near the Bishan MRT station, and saw a strong
sales performances with 430 units sold out of 505 units released for
sale. The average selling price of the units sold was ~S$1,500 psf –
which was 5% to 10% lower than those at the adjacent 509-unit Sky
Habitat project. We like that the group has taken a rational approach,
in terms of pricing, to move units during the Sky Vue launch. The strong
sales performance will significantly reduce the group’s unsold exposure
in the locality from over a thousand units at Sky Habitat and Sky Vue
to ~600 units currently. We continue to favor large-cap developers with
strong balance sheets and diversified exposure across regional real
estate markets. Maintain BUY on CAPL with an unchanged fair value
estimate of S$3.77. (Eli Lee)
For more information on the above, visit www.ocbcresearch.comfor the detailed report.
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