Brokers' take

Compiled by Andrea Soh

FRASERS COMMERCIAL TRUST | BUY (UPGRADE)

DEC 18 CLOSE: $1.43

PRICE TARGET: $1.51

OCBC Investment Research, Dec 18

Frasers Commercial Trust (FCOT) has entered into a 50:50 JV with its sponsor, Frasers Centrepoint Limited (FCL), to acquire Farnborough Business Park (FBP), which comprises 14 commercial buildings in the UK.

We like the defensive attributes of the asset, as it has a long Wale (weighted average lease expiry) of 8.3 years, a high occupancy rate of 98.1 per cent and good quality tenants.

We are particularly encouraged by the expansion of FCOT's investment mandate to include real estate assets in Europe used for commercial purposes.

We note that FCL's recently-acquired portfolio of business parks in Thames Valley is complementary to FBP, and would allow FCOT to tap on FCL's asset management platform for greater synergy and operational efficiency.

With greater clarity over the situation at Alexandra Technopark, as well as management's ability to tap on previous capital gains, we believe that DPU, based on the existing portfolio, should remain stable and will be further augmented by growing the UK/Europe portfolio.

Given management's goal of building a balanced and diversified portfolio across geographies, we lower our beta assumption and our cost of equity now drops to 8.2 per cent.

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SINGAPORE PROPERTY & REITS

DBS Group Research, Dec 15

We remain bulls in the Singapore property market as we believe that most real estate subsectors have turned the corner on the back of improving demand-supply dynamics.

Supporting a more buoyant outlook for landlords (Reits) and developers are that abating supply risk, which will drive prices and rentals higher as the year goes by.

With $22.3 billion of new sites in the bag, developers will have to deliver on market expectations that the strong rebound in transaction volumes will continue in 2018, translating into strong take-up rates for upcoming new launches.

We believe further re-rating will be stock-specific and developers with a robust line-up of new launches will be better-positioned to ride this market upswing.

Our picks are City Dev, UOL and FCL.

We also initiate coverage on mid-cap developer Roxy-Pacific, given that management has landbanked ahead of peers with most projects coming to market in 2018.

Reits' valuations are likely to be supported by investors' expectations of a return to growth in DPU profiles.

We project S-Reits to deliver a FY18-19F DPU CAGR of 2 per cent, up from a minus 1 per cent drop in FY17F.

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