SINGAPORE (July 2): OCBC Investment Research is reiterating its “buy” call on Frasers Commercial Trust (FCOT) while lowering its fair value estimate by a cent to $1.53 after incorporating more conservative assumptions for near-term DPU projections.

While the research house notes an encouraging upward trend in spot rents, it highlights the near-term DPU’s dependence on support drawn from the distribution of capital gains arising from FCOT’s previous disposal of hotel development rights for China Square Central.

OCBC has therefore reduced its FY18-19F DPU forecasts by 2.2%-2.9% despite the belief that the trust’s current FY18F dividend yield of 7% could compress further, given its significantly lower forward yield of about 5.5% registered at the start of the last rental recovery cycle in 1H13.

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