Previously, I wrote about the investment risk of Frasers Commercial Trust which is the lease expiry for Hewlett-Packard ( Frasers Commercial Trust Long Term Play in Office Rental ). The fear has turned into reality. Frasers Commercial Trust has announced that it has been informed by Hewlett-Packard Enterprise Singapore Pte Ltd (“HPE”) that they will vacate their space at Alexandra Technopark upon the expiration of relevant leases on 30 September and 30 November this year.
The rental income for the space to be vacated makes up 6.6% of FCOT’s total gross rental income for the month ended 30 June 2017. In the announcement, the manager revealed that they have already secured a new tenant for 13.4% of the space to be vacated.
Since the announcement, the share price has fallen from S$1.42 to S$1.36. There is still more room for the share price to fall. My target entry price will be from S$1.25 downwards.
Like I have mentioned in my previous post, Alexandra Technopark is undergoing Asset Enhancement Initiative (“AEI”) and hotel development works is undergoing at China Square Central. If I were to increase my holdings in Frasers Commercial Trust, it will be more focused on long term play as the AEI and hotel development works may not complete that soon.
I like Frasers Commercial Trust for the managers ability to still achieve a positive quarterly results despite the challenging environment and may increase my holdings should the opportunity arises due to short term bad news.
I like your analysis on FCOT entry price at $1.25. However, taking into account that they “might” inject Frasers Tower in CBD into the Trust upon its completion, I suspect there may be a rights issue around that time (whenever that is). So, it might be prudent to wait and see for now instead.