Attention to Reader of Singapore REITs

Gobi March, a 250km self-supported desert footrace over 7-days will be held in Taklamakan Desert, China.

Kwan is participating the Gobi March in aid of the Student Advisory Centre(SAC). Please visit the fund raising website by clicking this link.

Thank you.

Merry Christmas to all reader.

Attention to Readers of Singapore REITs

Thank you for taking the time in expressing your view on the poll that was conducted from Nov 22 to Nov 30 2011. Children and Youth has the highest number of votes during the polling period. Thus, we have decided to donate to the Children's Aid Society.

Attention to Readers of Singapore REITs

As the year draws to an end, we are planning to start an annual tradition of donating to a charity, using part of the proceeds (perhaps we'll share our charity plans for the balance at a later date when the amount is a lot more meaningful) we'd collected from our adsense account. Since the money comes from our readers, we thought that it'd be more meaningful for the readers to make the decision on which charity to donate to. 

Which charities and causes do you support? Please express your view on the poll that was setup on the sidebar.

Last day of polling is on 30 Nov 2011.

Things Picking Up

• 1Q10 revenue of $29.6 million, net property income of $23.5 million, distributable income available to unitholders of $7.4 million.
• 1Q10 DPU of 0.24 cents.
• Total asset value of $1.9 billion.
• Fair value raised slightly from $0.17 to $0.18, upgrade to Buy

Steady showing
(Note: Financial year-end changed to 30 Sep) FCOT recorded 1Q10 revenue of $29.6 million (+19.1% y-y, +15.5% q-q), net property income of $23.5 million (+26.6% y-y, +17.7% q-q) and distributable income available to unitholders of $7.4 million (-20.2% y-y, +20.3% q-q). 1Q10 DPU was 0.24 cents (-80.9% y-y, +20.0% q-q). Underlying rental income streams were steady, the increase over prior quarters were mostly due to new acquisition and favorable exchange rates. 1Q10 revenue was boosted by the contribution from Alexandra Technopark, which was added to the portfolio in August 2009. The revenue contribution from Australia benefited from the strengthening AUD, while the Japan properties performance were largely flat. Percentage of revenue breakdown is 51% from Singapore, 35% from Australia and 14% from Japan. DPU was 0.24 cents, a big drop from a year ago, due to higher borrowing cost as well as dilution from the rights issue in 2009. However 1Q10 DPU was 20% higher than 3Q09. We believe things are already on the mend as seen from the improving numbers.

FCOT registered a slight decrease of 0.2% in its asset value. Revaluation was carried out on central Park and Cosmo Plaza. The decrease comes from Cosmo Plaza, which is being earmarked for divestment. Total asset value is $1,914.2 million.

Capital management
FCOT completed all recapitalization and refinancing activities in 2009. As at 31 Dec 2009, it has total debt of $823.8 million, of which 60% is SGD loan, 19% is AUD loan and the rest is JPY loan. The constitution of the loan is a deliberate effort by management so as to form a natural hedge on the foreign cash flows. Gearing is 40.4% and the loans are due only in 2012. We believe in the event that FCOT managed to divest Cosmo Plaza and the AWPF wholesale fund, proceeds will be used to pare down debt.

Forecasts
We are slowly gaining confidence in management execution to turn FCOT around from the time when the new management team took over in late 2008. We have seen strong support from the sponsor, Frasers Centrepoint Limited, through the injection of Alexandra Technopark. We also believed that the relationship enabled FCOT to secure credit facilities from the lenders. We did mention in previous reports that repositioning the REIT takes time and management has shown that they are delivering what they have promised. Again we like to echo our view that the transformation is not yet complete and investors have to take a long-term view. We are forecasting a FY10E DPU of 1.26 cents on the back of improving market fundamentals. We are raising our fair value from $0.17 to 0.18 derived from our DCF valuation on a WACC of 7.04%. Upgrade to Buy.