FCT acquisitions to boost growth: analyst

The purchase of PREAFL could give it the distinction as Singapore’s third-largest retail REIT.

Frasers Centrepoint Trust’s (FCT) acquisition of Waterway Point and PGIM Real Estate Asia Retail Fund Limited (PREAFL) are expected to aid the trust in its inclusion plan in FTSE EPRA NAREIT Developed Asia Index, according to an analyst report by CGS-CIMB. 

FCT has bought a 21.13% stake in PREAFL in April and 33.3% of Waterway Point in July, which were both funded through equity fund raising last May and June.

“We like both acquisitions as the acquired malls fit into FCT’s current portfolio and solidify FCT’s position as a pure play Singapore suburban mall focused operator,” the report stated.

FCT’s net property income slipped 1.1% YoY to $34.6m in Q3 from $35m in 2018, an announcement revealed. However, revenue edged up 1.6% YoY from $48.32m to $49.1m.

It blamed its dismal NPI performance on higher property expenses arising from the absence of property tax refund, which occurred in the same period in 2018. Meanwhile, the rise in revenue was attributed to higher contributions from Northpoint City North Wing and Changi City Point. The portfolio occupancy rate of the properties as at June 2019 was 96.8%, higher than the 94% recorded for the same period in 2018. 

Furthermore, the said acquisitions is said to have improved FCT’s investable market cap substantially, fulfilling all the criteria needed to qualify as a member of the EPRA/NAREIT Index. As a result, the firm’s share price is expected to re-rate following the inclusion in the index.

CGS-CIMB added that its inclusion may occur as soon as the September review happens. Of the 41 REITs listed in Singapore, only 14 are part of EPRA/NAREIT Index, indicating that FCT’s visibility on investors’ radars “should improve substantially after the inclusion.”

In addition, the report discusses that FCT’s acquisition of all PREAFL’s retail assets in Singapore could boost their DPU forecast by about 3% and target price to $2.98. This could also allow FCT to become the third-largest retail REIT in Singapore by AUM.

Also read: PGIM Real Estate AsiaRetail Fund's assets could propel Frasers Property's retail mall position

Waterway Point is also projected to introduce a new growth trajectory in FCT, driven by Punggol’s increasing population.