Frasers Property Limited - CGS-CIMB Research 2021-02-11: Proposing A Rights Issue


Frasers Property Limited - Proposing A Rights Issue

  • Frasers Property announced a proposed S$1.28bn renounceable rights issue.
  • Proceeds to strengthen Frasers Property's balance sheet and enhance business resilience.
  • Reiterate ADD with a lower RNAV-based target price of S$1.41.

Frasesrs Property proposes S$1.28bn renounceable rights issue

  • Frasers Property Limited (SGX:TQ5) has announced a proposed renounceable rights issue of up to 1,085.3m new shares at S$1.18 per unit, on a basis of 37 for every 100 existing shares, to raise S$1.28bn of net proceeds. The rights issue is not underwritten. See Frasers Property's announcements.
  • Major shareholders, TCC Assets Ltd and Thai Beverage (SGX:Y92), have given an irrevocable undertaking to subscribe for their pro-rata entitlements of the rights shares.
  • The rights price represents a 4.8% discount to the last traded Frasers Property's share price, a 3.6% discount to the theoretical ex-rights price of S$1.224 (as at 10 Feb 2021) and a 47.5% discount to the proforma adjusted Dec 2020 NAV of S$2.25 per share.

Enhancing business resilience

  • According to Frasers Property's management, the rationale for the rights issue is to enhance business resilience through continued exposure in the industrial/logistics/business parks segment, to build financial agility through capital partnerships and to strengthen the balance sheet.
  • In terms of utilisation of net proceeds, ~S$700m is intended for the acquisition, investment and capex for the development of industrial logistics and business parks assets. Another S$250m is allocated towards establishment of private funds or joint ventures to invest in property assets (including commercial and ancillary assets) as well as up to a further S$330m for strategic investments, acquisitions, development/redevelopment of existing as well as general corporate expenses.

Proforma net debt to equity ratio to decline to 0.81x

  • In terms of financial impact, the rights issue is likely to expand Frasers Property’s issued share base by ~37% to 4,018.5m shares.
  • The proforma net debt to equity ratio is projected to decline from 1.05x as at Sep 2020 to 0.81x, after adjustment to reflect the rights issue & the relevant transactions.
  • Meanwhile, Frasers Property's proforma FY20 earnings per share could be reduced by 13% on a similar basis while proforma FY20 book NAV per share could dip from S$2.58 to S$2.20.

Reiterate ADD rating

LOCK Mun Yee CGS-CIMB Research | 2021-02-11
SGX Stock Analyst Report ADD MAINTAIN ADD 1.41 DOWN 1.700