FrasersCT – CIMB

Holding fort North

• Well-located suburban assets. FCT is a retail real estate investment trust with three suburban retail properties concentrated in the north of Singapore. Its welllocated assets in the heart of suburban residential estates and major transportation nodes should be sustained by ready population catchments and limited competing supply.

• Strong sponsor to aid acquisitions. FCT is supported by Frasers Centrepoint Limited (FCL), which provides FCT with a ready pipeline of four assets for acquisition.

• Growth via acquisitions and double-digit rental-renewal rates. FCT is poised for growth via acquisitions and growth in retail rents from 2008 to 2010. We expect FCT to acquire S$480m of properties from 2008 to 2010. In addition, retail rents are expected to increase by up to 45% over preceding rates from 2008 to 2010 on the back of tight supply and ongoing asset enhancements.

• Initiate with Outperform and DDM-derived valuation of S$1.70. We have a target price of S$1.70, using DDM valuation (discount rate 8.5%, terminal growth rate 4%). This represents a total prospective return of 38.3% from a forward yield of 5.5% and potential price upside of 32.8%.