Looking at Frasers Commercial Trust

I have been eyeing on Frasers Commercial Trust(FCOT) for awhile since I divested CapitaCommercial Trust back in 2017. However the news of Hewlett-Packard moving out of FCOT hold me back. I was informed recently that my office is moving to Alexandra Technopark.  This prompt me to take a fresh look on the REIT.

Alexandra Technopark
I believe Hewlett-Packard risk has been fully priced in. Hewlett-Packard now only occupy 3.7% of gross rental income of FCOT portfolio. AEI on Alexandra Technopark to be finished 2H2018, got some new facilities and exercise areas. Too bad no gym doh. Assuming Alexandra Technopark will continue to attract tenants, this is a catalyst for DPU growth.

55 Market Street Divestment
After the divestment completion in Aug 31 2018, gearing is reduce to 26.5% assuming proceeds are used to pay down debts. This allows more rooms for acquisition, RORF from sponsor Frasers Property. NAV pro forma is $1.70 as at 30 sept 2017, adjusted to current price, NAV should be $1.60. At current price of $1.41, PB ratio is 0.88.

Conclusion
The completion of  AEI at China Square Central and Alexandra Technopark (as well as tenant growth) will be near term catalyst. In addition there will be room for more acquisitions.

However, management fees are 100% paid in units compare to 12% in 2017. Reversing this may halt DPU growth but remain stable. In 2Q2018, 1,884,606 units were issued at $1.4192 as management fees worth $2.675 Million which is equivalent to $0.031 per unit if taken in cash. 

DPU for the pass few years has been stagnant, probably due to FCOT' plans for Hewlett-Packard's departure as well as the cost for the AEI. At DPU of 9.6cents, current price of $1.41 give a yield of 6.81%. With adjusted pro forma of $1.60, PB ratio 0.88. Assuming a yield of 7%,  TP to be set at $1.37 or below. I believe the worst is over for FCOT.

Vested @ $1.37