OCBC Investment Research raised its target price on Frasers Commercial Trust to S$1.31 from S$1.23 and maintained its 'buy' rating, citing the company's possible debt reduction, an expected rise in income and attractive valuation.
Frasers units were up 0.4 percent at S$1.16 on Tuesday. The units have increased 58 percent so far this year versus the 27 percent gain in the FT ST Midcap Index .
With the recent sale of its KeyPoint property to Bayfront Ventures Pte Ltd for S$360 million ($292.7 million), Frasers is likely to sit on net proceeds of S$357.8 million and book in a gain of S$72.8 million, OCBC said.
OCBC noted that Frasers is likely to use the bulk of the sale proceeds to redeem half of its series A convertible perpetual preferred units and reduce its existing debt.
Frasers is also expected to gain from interest savings as a result of the early refinancing of its S$500 million term loan facility at favourable borrowing margins, OCBC said.
It added that Frasers' acquisition of the balance 50 percent interest in Caroline Chisholm Centre and direct tenant leases at China Square Central are likely to contribute positively to the company's rental income.
OCBC said the stock was trading at an "attractive" price-to-book ratio of 0.87 times.
1037 (0237 GMT) (Reporting by Eveline Danubrata in Singapore; firstname.lastname@example.org) ($1 = 1.2301 Singapore dollars) (Editing by G.Ram Mohan)
Keywords: MARKETS SINGAPORE STOCKSNEWS/FRASERSCOMMERCIALTRUS