In Dec 2017, FCOT announced the joint acquisition of a 50% stake in Farnborough Business Park (FBP) with sponsor Frasers Centrepoint. The total purchase consideration of GBP174.6 million ($314.8 million) was on par with valuation.
In a Tuesday report, analyst Vijay Natarajan says, "We view the move favourably, as the properties’ pro-forma NPI yield of 6.4% is considerably higher than its current ~5.5% portfolio yield. Additionally, the freehold asset has a good quality tenant mix, with a long weighted average lease expiry (WALE) of 8.3 years."
And as RHB expects management to opt for a 50:50 equity and debt funding structure, FCOT's gearing should remain at around 36%.
Meanwhile, the $45 million asset enhancements to revamp Alexandra Technopark (ATP) are slated for completion by mid-2018. However, downsizing by its two key tenants – Hewlett-Packard Enterprise Singapore (HPE) and Hewlett-Packard Singapore (HPS) – will cut the building’s near-term occupancy to 60-70%.
Elsewhere, China Square Central’s (CSC) retail podium’s asset enhancement initiative (AEI) is on track for completion by 1Q19. The repositioning would increase the mall’s NLA by 17% to 75,000 sf. Shopper traffic is also expected to pick up post-AEI.
"We have revised our FY18-20 DPU higher by 3-5% after factoring in FCOT’s recent acquisitions," says Natarajan, who has a $1.55 target price for the REIT.
As at 1.06pm, units in FCOT are down 3 cents at $1.52 or 6.6% distribution yield for FY18.
