MARKET PULSE: Far East Hosp Trust, Office REITs (26 Sep 2012)

Stock Name: Far East HTrust
Company Name: FAR EAST HOSPITALITY TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.08

Stock Name: Frasers Comm
Company Name: FRASERS COMMERCIAL TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.23

Stock Name: CapitaComm
Company Name: CAPITACOMMERCIAL TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.53

MARKET PULSE: Far East Hosp Trust, Office REITs

26 Sep 2012

KEY IDEA Far East Hospitality Trust: Largest pure Singapore hospitality REIT Far East H-Trust's portfolio consists of 11 properties in Singapore, including seven hotels and four serviced residences, giving a total of 2,531 rooms/units. The trust has the largest diversified hospitality portfolio in Singapore by asset value, equaling S$2.14b. With a mix of hotels and serviced residences, the portfolio is able to ride on the up-cycle in the hotel industry, while the serviced residences would provide downside protection during economic slowdowns. The Sponsor is part of Far East Organization, which is the largest private property developer in Singapore. Three hotels and four serviced residences have been identified by the Sponsor as Sponsor Right of First Refusal (ROFR) properties which could be offered to Far East H-Trust. These properties could significantly increase the number of hotel rooms/serviced residence units in the trust by 1,242 rooms/units, or 49.1%, to 3,773. We initiate with BUY and a RNAV-based fair value of S$1.08. (Sarah Ong) MORE REPORTS Office REITS: Rental declines likely slowing in 3Q12 Due to limited supply coming online and better than expected demand, we believe office fundamentals are more benign than expected. In our view, office rentals are likely to show a more subdued dip in 3Q12 after three consecutive quarters of declines since 3Q11. In addition, core CBD vacancies also showed a reversal from a rising trend in 2Q12 to register a 0.9 ppt dip to 8.4%, and expect a similar trend for vacancies ahead. Note that since our upgrade of Office REITs to OVERWEIGHT on 21 Aug 2012, our top pick CCT has appreciated 4.0% versus the STI's 0.2% gain. Maintain OVERWEIGHT on Office REITs. Our top picks in the sector are CCT [BUY, FV: S$1.53] and FCOT [BUY, FV: S$1.23].

For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - US stock indexes fell Tuesday after a non-voting Federal Reserve member gave a negative take on the central bank's newest round of quantitative easing. The Dow fell 0.8% to 13,457.55. The S&P 500 Index slipped 1.1% to 1,441.59. - Temasek Holdings has entered into an agreement to sell 400m shares in SingTel as part of its portfolio rebalancing; but SingTel will continue to be the largest company in its portfolio. - Joint owners Mirvac Group (ASX: MGR) and K-REIT Asia held a topping off ceremony to celebrate the completion of the main structural works for the Sydney office building, 8 Chifley Square. - Metro Holdings has been jointly awarded the tender for a 99-year leasehold land parcel located at Prince Charles Crescent, Singapore, having an approximate site area of 23.8k sqm at the price of S$516.3m.