FCOT – DBS

Lifted by Alexandra Technopark

At a Glance

• Stable 1Q10 pulled up by Alexandra Technopark
• Earnings stable with 86.5% of income secured for FY10
• Maintain HOLD, TP S$0.14

Comment on Results

Results posted no surprises. Gross revenue and net property income was 19.1% and 26.6% higher at S$29.6m and S$23.5m respectively due to stronger AUD vs S$ and a full quarter’s contribution from Alexandra Technopark. The increase was partially offset by loss of income at Central Park and lower occupancies at Cosmo Plaza. Total distributable income was 31% higher at S$12.1m of which S$4.7m will be payable to its CPPU holders. Distributable income amounted to S$7.4m, which translated to DPU of 0.24 Scts.

Looking within for growth. Leases expiring in FY10F, which accounted for 13.5% of topline, are largely from Keypoint and Central Park. For this year, management will embark on AEI activities for Keypoint to boost occupancies and tenant retention, further strengthening its position to capitalize on its increased accessibility with the completion of Circle line Nicholl Highway MRT Station. In addition, the manager continues to look to divest Cosmo Plaza, which reported a further S$3.9m devaluation to S$50.1m.

Recommendation

Maintain HOLD, TP S$0.14 maintained. We believe that it has yet to fully complete its portfolio restructuring with the proposed sale of its Japanese assets. Coupled with a weak office outlook, near term re-rating catalysts appear lacking. As such, we maintain our HOLD call and no change to our TP of S$0.14.