Frasers Commercial Trust (FCOT) Q4FY17

Overall

1. We have yet feel the impact of HP lease expiry as the 1st tranche only expire in 30 Sep and next will be 30 Nov
2. Between now to 1Q18 will need to assume lost of income around 18% of gross rental
1. Are you ready to accept the worst scenario? 
2. However the place to be vacated out passing rent is current below the market rate
3. Positive rental reversion for Q417 due to central park
4. WALE for Singapore office is pretty short which around 1 year plus
1. To note, office property lease expiry will be around 7.7% gross rental
2. Passing rent and current rent not much a big gap.
1. Based on the average 3-5 years lease period, the likely worst rental reversion may come in FY18 on-ward as office rent was on uptrend from 2014 to 2015 (Wrong???)

Dividend

As expected, there is no catalyst for the dividend growth. For Q417 the dividend is lower by 1.6% compare to last year Q417 at 2.407 cent even with 18% Management fees to be paid by FCOT Units. In Q416, no management fees paid in unit.

 

 

 

 

 

 

 

 

 

 

 

Lease Expiry Profile

1. 33.8% of gross rental will expire in FY18
2. Hewlett-Packard Enterprise confirm not renewing 6.6% of it
1. Management has manage to rent out 61,000 out of 178.843 sf and from the rental revision slide, seems like the management has achieve rental +1.1% what HPE has paid
3. Next blow seem will come from  Hewlett-Packard Singapore Pte Ltd (HPS) which account 11.1% of FCOT rental and will expire in 30 Nov 2017 - This will likely push down the dividend.
4.  Will we see negative rental reversion in FY18?
1. Grade B CBD rent is $7.3 
1. CSC passing rent is $7.62 and it is account for 6.3% of gross rental income
2. 55 Market Street passing rent is $7.3 
2. Business Park (city) rent is $5.55 and ATP passing rent is $4
1. Do you see this as a jewel in crisis?
3. Central Park passing rent is $554 vs current $700 likely will achieve positive rental reversion. This might explain why central park rental boost the portfolio positive rental reversion

 

 

 

 

 

 

 

 

 

 

 

Debt Profile

1. No debt maturing until August 2018
2. Debt expiring in any one financial year no more than S$182 million
3. 91% of gross borrowings on fixed rate

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