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Following Up On Frasers Commercial Trust

Frasers Commercial Trust Logo

I was very much surprised Frasers Commercial Trust was being able to maintain its distribution per unit of 9.82 cents in FY 2017. Based on the current price of S$1.42, the dividend yield is 6.92% which I consider very much attractive compared to other REITs at the moment.

I looked at Frasers Commercial Trust almost one year ago ( Frasers Commercial Trust Long Term Play in Office Rental ). It is time for me to take a look at the recent developments, especially news on HP (“Hewlett-Packard”) on whether they are moving out of Alexandra Technopark.

First, here are the full year financial results for FY17. Given the current development works at China Square, I am not expecting revenue to increase at this moment due to the missing occupancy. I will consider the following results pretty resilient, at least for me.

Gross Revenue 156,551 156,497
Net Property Income 113,843 115,614 (1.5)
Distributable Income 78,600 77,607 1.3
Distribution Per Unit (“DPU”) (cents) 9.82 9.82

However, the 1QFY18 results does not look so rosy.

Gross Revenue 35,321 39,679 (11.0)
Net Property Income 24,858 29,212 (14.9)
Distributable Income 19,456 19,939 (2.4)
Distribution Per Unit (“DPU”) (cents) 2.40 2.51 (4.4)

HP Confirmed Moving Out of Alexandra Technopark

On 22 September 2017, the Manager announced that Hewlett-Packard Enterprise Singapore Pte Ltd (“HPE”) intended to vacate an aggregate of 178,843 sf of space at Alexandra Technopark (“ATP”) upon the expiration of relevant leases on 30 September 2017 and 30 November 2017. The space vacated or to be vacated by HPE accounts for around 17.1% of the total net lettable area of the property and 6.6% of the portfolio gross rental income of Frasers Commercial Trust as at 30 September 2017.

Since it is confirmed, I guess Frasers Commercial Trust has to start looking for new tenants. Time to move on.

Aquisition of Farnborough Business Park (Europe)

Frasers Commercial Trust entered into a 50:50 joint venture with FCL on 14 December 2017 to acquire Farnborough Business Park, an award-winning business park in Thames Valley in the United Kingdom, at a property value of £175 million.

Below are some details of the new asset. There are an estimate of 36 tenants. Found from various sources, it was mentioned that DPU is expected to increase from 9.82 cents to 9.97 cents which is a 1.6% increase.

Tenure Freehold
Total net lettable area 554,672 sq ft
Selected major tenants as at 30 September
Fluor Limited, INC Research UK Ltd, Time Inc
(UK) Ltd, Aetna Global Benefits (UK) Ltd and a
unit of Regus
Occupancy Rate 98.1%
WALE by Gross Rental Income (years) 8.3
Property Valuation (£million) 175.05

My Thoughts

The development works at China Square continues to impact Frasers Commercial Trust as the lack of occupancy means the lack of rental income. With the addition of Europe property, Farnborough Business Park, it was mentioned by various sources to add 1.6% to its DPU.

If you are looking at long term play, Frasers Commercial Trust looks like a good deal with its 6.92% dividend yield. Things will become more rosy in the year 2019 after rental income comes in from China Square with the completion of AEI works for Alexandra Technopark and also the full year revenue from Farnborough Business Park. As Farnborough Business Park is only added in January to its portfolio, it is still early to tell whether the acquisition is a defensive play or a miss.

If you really love FCOT, buy and hold till 2019 for better clarity. Just my two cents worth!


  1. HP is moving out slowly throughout till end 2018, has the dpu been fully impact? occupancy at 70%, has this factor in HP?

    Hp leaving slowly helps to prevent the DPU to drop drastically. However a headache to see if DPU will be further impacted.

    what do you think? 2.40 cents dpu for Q1 and Q2. will this DPU sustain thru Q3 and Q4?
    and DPU of Q3 and Q4 2017, the dpu dropped, is this due to HP too?

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