SINGAPORE (June 26): DBS Group Research is maintaining its “buy” call on Frasers Commercial Trust (FCOT) with a Street-high target price of $1.70, on account of its five-year tenancy lease deal with Google at Alexandra Technopark (ATP).
See: Google Asia Pacific is new tenant at Alexandra Technopark
The average gross rent for Google is expected to be kept at ATP’s recent monthly signing rates of about $4 to low $4s psf, save for some step-ups that might occur in the lease.
Google will occupy one-third of ATP beginning CY2020, bringing the committed occupancy for the property to 93.7%, a hike from the figure of 59.2% recorded at end March.
DBS analyst Mervin Song says, “In our estimates, we had assumed occupancy for ATP would average 90% in FY21, versus the current committed occupancy of 93.7%. It appears our original occupancy projections of 75-85% over FY19- 20F are on the high side given the time taken to secure Google.”
“With additional income from Google, in our view there is a high likelihood FCOT will have a “clean yield” (without capital distributions) from FY21 onwards which should help close FCOT’s yield differential with its large-cap peers,” Ong adds.
As at 3.58pm, shares at FCOT are up 6 cents at $1.64, giving a FY2019F dividend yield of 5.9%.
