FCOT – DBSV

Steady performance

At a Glance

• 3Q10 DPU of 0.25 Scts in line

• Keypoint’s occupancy inching up to 78.6% as of 3Q10

• HOLD, TP S$0.16 maintained

Comment on Results

3Q10 DPU of 0.25 Scts in line. Gross revenues and net property income were higher by 29% and 33% yoy to S$29.2m and S$22.7m respectively. Performance was largely due to contributions from Alexandra Technopark, which was acquired back in 4Q09. Distributable income to unitholders came in at S$7.7m (DPU of 0.25 Scts), up 39% yoy, partly lifted by lower interest costs post debt re-financing in conjunction with its rights issue a year back.

Stable balance sheet metrics. FCOT’s balance sheet remains healthy with gearing at 40.4% and interest cover of 2.74x.

95% of income secured YTD, Keypoint’s occupancy inching up. With a quarter to go, FCOT has secured majority of its income to date. Keypoint has also seen an improvement in average occupancy after the opening of nearby MRT train station– inching up to 78.6% as of 3Q10. Looking forward, 11.6% of revenues will be up for renewal in FY11, of which a majority will be for leases in Keypoint asset in Singapore (5.3% of portfolio income). Average expiring rentals are at cS$5.50psf pm and we expect renewals to remain flattish.

Recommendation

HOLD, TP S$0.16 maintained. Valuations are undemanding at 0.6x P/BV and FY10-11F yields of 7.6-8.0%. However, we see further catalysts only upon completion of its portfolio restructuring with the proposed sale of its Japanese assets. Maintain HOLD.