Frasers Property Limited - DBS Research 2019-02-19: A Bigger Pipeline For Frasers Centrepoint Trust?

FRASERS PROPERTY LIMITED (SGX:TQ5)

Frasers Property Limited - A Bigger Pipeline For Frasers Centrepoint Trust?

Frasers Property Limited is acquiring a 17.8% stake in the largest non-listed retail mall fund in Singapore for S$356m
Implied price at 1x P/BV; annualised dividend yield of c.3.7%
Albeit small, the strategic investment is interesting as it gives Frasers Property Limited access to some of the prized unlisted suburban malls in in Singapore
While details are unclear, these properties may form an attractive future acquisition pipeline for Frasers Centrepoint Trust (SGX:J69U).

FRASERS PROPERTY LIMITED (SGX:TQ5) announced the acquisition of a 17.8265% stake in PGIM Real estate AsiaRetail Fund for S$356.4m (including an estimated S$3.3m of 4Q18 dividend), which implies a valuation of 1x P/BV. Based on the 4Q18 dividend, the annualised dividend yield is c.3.7%. See Frasers Property Limited's Announcements.
As information disclosed is limited, the dividend payout of the fund is unknown. The acquisition will be funded via internal funds or external borrowings or a combination thereof.
The fund is an open-end private investment vehicle and the largest non-listed retail mall fund in Singapore. It owns and manages 6 retail malls (Tiong Bahru Plaza, White Sands, Liang Court, Hougang Mall, Century Square, and Tampines1) and an office property (Central Plaza) in Singapore, and 4 retail malls in Malaysia (Penang and KL). Based on AsiaMalls’ website, the Singapore properties are worth S$3bn while the Malaysian properties are worth S$400m.
According to the announcement, the rationale for the acquisition is that the acquisition is in line with Frasers Property Limited’s strategy to grow its recurring income sources and enhances the resilience of its portfolio of investment properties with the underlying assets which comprises largely of suburban retail properties. In addition, the acquisition offers an opportunity for the group to grow its presence in the retail sector in Singapore.

Albeit small to the overall group, we believe that the strategic intent is huge and interesting as it gives Frasers Property Limited access to some of the prized suburban malls (in the unlisted space) in Singapore such as Tiong Bahru Plaza and Tampines 1.
While details are unclear at the moment, these properties may form an attractive future pipeline for Frasers Centrepoint Trust to acquire and bulk up its presence in Singapore.

Rachel TAN DBS Group Research | Derek TAN DBS Research | https://www.dbsvickers.com/ 2019-02-19

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