OCBC Investment Research has lowered its fair value estimate on Singapore-listed office REIT, Frasers Commercial Trust, despite maintaining a ‘Buy’ rating on the counter.

According to the firm’s investment report on 14 March issued by, Frasers Commercial Trust’s share price has lagged both the FTSE ST REIT Index, and Singapore’s broader Straits Times Index (STI), for the year-to-date.

“We believe this could be attributed to lease renewal uncertainties of [the REIT’s]major tenants, two of HP’s entities, at its Alexandra Technopark property”, said OCBC.

The bank pointed out that these tenants collectively contributed 17.5% of Frasers Commercial Trust’s gross rental income, as at 31 Dec 2016.

In relation to this, OCBC is assuming partial renewal by the tenants, and thus lowering its FY 2018 occupancy assumption at Alexandra Technopark from 95% to 80%.

“Our FY18 DPU forecast is consequently cut by 9.0%”, said the bank.

However despite the revised forecast, which saw Frasers Commercial Trust’s fair value estimate lowered from SGD1.48 to SGD1.39, OCBC noted that the REIT is trading at FY18 forecasted distribution yield of 7.3%.

“Hence, we believe uncertainties over its [Alexandra] asset have been priced in by the market”, OCBC added.

Frasers Commercial Trust finished the trading day about 0.8% higher from its previous close on the Singapore Exchange to end at SGD1.26.

By Ridzwan Rahmat

Ridzwan has been analysing REITs and business trusts since 2008, and personally manages a portfolio comprising mainly of SGX-listed REITs. He founded REITsWeek in 2013.