Brokers' take: OCBC trims FLCT fair value estimate to S$1.66 post-Q1 FY22 update
OCBC Investment Research has maintained a "buy" call on Frasers Logistics and Commercial Trust (FLCT) BUOU but cut its fair value estimate to S$1.66 from S$1.71, it said in a report on Tuesday (Feb 8).
This comes after the real estate investment trust (Reit) posted its business update for the first quarter ended Dec 31, 2021.
The lower fair value was due to the research house trimming its FY2022 and FY2023 distribution per unit estimates by 2 per cent and 3 per cent respectively, after it factored in the Reit's recently announced acquisitions and divestments.
The fair value estimate of S$1.66 is a 20.3 per cent upside to its current unit price, which was down 0.7 per cent or S$0.01 at S$1.38 as at 4.04 pm on Tuesday.
Of the recent deals, its analysts noted the proposed S$810.8 million divestment of Cross Street Exchange (CSE) was at a healthy premium of 28.3 per cent to its book value of S$632 million, and the proceeds from the deal are likely to decrease the Reit's aggregate leverage to 29.8 per cent, as well as repay its floating debt.
FLCT's fixed rates debt amount is thus likely to increase from 71.6 per cent of its debt due to the floating debt repayment, the research team added.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
It also observed that CSE, a mixed-use commercial property, was from the Reit's commercial portfolio that dragged its overall occupancy, which dropped slightly to 95.9 per cent in spite of its logistics and industrial portfolio logging 100 per cent occupancy.
This led the research team to believe that FLCT is likely to pursue acquisitions in the logistics and business park sub-sectors, using the "significant debt headroom" gained from the divestment.
Despite the drop in occupancy, the research team noted that FLCT's occupancy level remains high and is a reason for its defensive profile that the team considers an investment merit, along with long weighted average lease to expiry, manageable lease expiries in FY2022 and a strong ESG focus.
READ MORE:
- Frasers Property Singapore appoints new CEO, effective Apr 1
- Covid-19 had 'no material impact' on Frasers Logistics & Commercial Trust's portfolio despite challenges to retail segment
- Frasers Hospitality Trust sees better RevPAR in Q1
Copyright SPH Media. All rights reserved.
