Frasers Centrepoint Trust - RHB Invest 2016-11-07: Acquires retail podium of Yishun 10 Cinema Complex for SGD37.8m

Frasers Centrepoint Trust - RHB Invest 2016-11-07: Acquires retail podium of Yishun 10 Cinema Complex for SGD37.8m FRASERS CENTREPOINT TRUST J69U.SI

Frasers Centrepoint Trust - Acquires retail podium of Yishun 10 Cinema Complex for SGD37.8m

  • Frasers Centrepoint Trust (FCT) announced an acquisition of all ten strata- titled retail units at Yishun 10 Cinema Complex (Yishun 10) for SGD37.8m from mainboard-listed Bonvests Holdings Limited. 
  • Yishun 10 is located adjacent to FCTs Northpoint Shopping Centre and has a NLA of 10,413 sqft. The property has a 99-year lease tenure commencing (Apr 1990) and its current occupancy stands at 99.5%. The transaction is expected to be completed by 16 Nov 2016.



Our view

  • The acquisition size is small (1.5% of FCT’s current portfolio value) and is done at a 5.6% discount to the independent valuation of SGD40m. The independent valuation was conducted by JLL.
  • We understand that JLL had used a cap rate of 4% for the property, which translates into NPI yield on cost of 4.3%. We believe FCT could extract more value from the asset by repositioning it and reaping synergies from its adjacent Northpoint mall.
  • The acquisition is expected to be fully funded by debt and is yield accretive considering FCTs average borrowing costs remains low at 2.1%.
  • Gearing is expected to marginally increase to 29.3% from 28.3%, while still leaving a healthy debt headroom of more than SGD400m (assuming a gearing of 40%) for future acquisitions.
  • We expect FCT to acquire one more asset from its sponsor or third party in the next 6-12 months to take advantage of the current challenging retail climate in Singapore market.
  • We maintain our BUY recommendation on FCT with a SGD2.22 TP as we expect: 
    1. growth from yield accretive acquisitions, 
    2. AEI works transforming Northpoint mall, and 
    3. occupancy improvement in Changi City Point mall.




Vijay Natarajan RHB Invest | http://www.rhbinvest.com.sg/ 2016-11-07
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 2.220 Same 2.220




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