Broker's take: OCBC keeps buy on FCOT on hotel plan, Aussie office block purchase

OCBC Investment Research is keeping its buy call on Fraser Commercial Trust (FCOT) after the Reit unveiled two fresh developments early Monday. FCOT said it has entered into a conditional agreement with an entity of its sponsor Frasers Centrepoint Limited (FCL) to develop a 16 storey hotel at China Square Central (CSC).

This would enable FCOT to unlock the value of the additional gross floor area (GFA) of 16,000 sqm. FCL will undertake the development of the hotel and commercial projects. Upon TOP, FCOT will grant a long lease of the hotel to FCL and the hotel will be operated under the 'Capri by Fraser' brand. FCL will pay FCOT S$44.8 million upon entering into the building agreement.

Secondly, FCOT also said that it would be acquiring an office building (357 Collins Street) in Melbourne, Australia, from Australand Property Holdings. The purchase price works out to be A$222.5 million and is expected to be funded by both debt and equity.

"This would allow FCOT to make its maiden entry into the Melbourne CBD office market,'' Andy Wong, analyst at OCBC said.

"FCOT would need to obtain the approval of unitholders at an EGM for both transactions to take place. We will provide more details after the analyst briefing. For now, we maintain our BUY rating but our S$1.65 fair value is under review,'' Mr Wong said.