Hot stock: Frasers Commercial Trust flat despite reporting a 7.3% increase in DPU

Frasers Commercial Trust (FCOT) traded flat on Tuesday morning, a day after it reported a 7.3 per cent increase in distribution per unit (DPU) to 2.35 Singapore cents for its third quarter ended June 30, 2015, compared with 2.19 cents a year ago.

Net property income (NPI) rose 6.1 per cent to S$24.3 million, on a 17 per cent increase in gross revenue to S$34.7 million.

This was mainly due to the better performances of Alexandra Technopark and 55 Market Street. Alexandra Technopark saw a 68.4 per cent increase in NPI in Q3 on higher rents than the fixed master lease rent it used to get. 55 Market Street also continued to perform well on the back of higher rentals and occupancy, it said.

RHB analyst Ivan Looi maintained a "buy" rating on FCOT, pegging its target price at S$1.71, representing a 10 per cent upside. The counter was trading at about S$1.55 on Tuesday.

"Its Singapore portfolio continued to book better-than-expected rental reversion ranging 14-20 per cent for Q3. We expect the positive rental reversion to continue, due to the low-base passing rents in previous years," he said.

"The Reit's Singapore assets locked in double-digit rental reversion for both its new and renewed leases in the quarter, ranging from 14-20 per cent. For FY16, we maintain our expectation for high positive rental reversion for China Square Central and Alexandra Technopark, with 7 per cent and 10 per cent of the respective properties' gross rental income up for renewal in that period.

"We find (FCOT's) resilience unbeatable, especially in this volatile equity market. FCOT is uniquely positioned as the only office Singapore Reit not exposed to the oversupply of Grade A office space," he said.

He did, however, note that on a quarter-on-quarter basis, the trust's DPU had weakened on the depreciating Australian dollar against the Singapore dollar, even though its distributable income was fully hedged. The trust has two properties in Canberra and Perth.