Nibbled Frasers Centrepoint Trust

Frasers Centrepoint Trust (FCT) SGX: J69U announced the acquisition of an additional 12.07% stake in PGIM Real Estate AsiaRetail Fund (ARF) on 1 Jul 2020 for S$197.2 million.

ARF owns Century Square,Tiong Bahru Plaza, Hougang Mall, White Sands Mall, Tampines Mall and Central Plaza office block in Singapore and a mall in Malaysia.

PGIM Real Estate is actually the property investment division of Prudential Financial.

FCT's stakes in this Fund will increase to 36.89% after the deal is completed by the end of Jul 2020.

Its sponsor, Frasers Property will own the remaining 63.11% in ARF.

This deal is fully funded by debt and possibly at its current low borrowing rate of 2.44%.

This acquisition is slightly yield accretive and reinforces FCT's strategy of investment in suburban malls in Singapore.

However, gearing will increase from 34.7% to closer to 40%.

As highlighted by DBS Research, “We see this as the key catalyst for both FPL and FCT if the group is able to gain further control of the properties and convert its stake into actual physical asset ownership,”

It is highly possible that FCT will slowly up its stakes in the ARF and eventually add 5 more suburban malls in Singapore into its portfolio to be a dominant suburban mall Reit.

Though my war chest is depleted, I am tempted to ride on this wave of sururban malls exposure by FCT.

I regret selling off the FCT that I nibbled in May 2020 as after I sold at $2.07, the share price of FCT climbed to hit $2.60 before tapering off to $2.30 in recent days.

I learnt my mistake from timing the market and decided to nibble a small byte of it at $2.31 this time, hopefully for long term keep.

Not too long ago in Jun 2019, FCT had a preferential offering of 31 for 1000 units at $2.35. Hence, I believe below $2.35 is a fair price to accumulate FCT. 

I still believe FCT, at current valuation, is still fairly discounted to factor in the impact from Circuit breaker due to Covid-19, lower DPU and negative rental reversions in the short term.

In the long term, I am confident FCT can rebound back to the $2.80 or $3.00 levels. Its DPU will also recover to above 12 cents annually eventaully.

Thanks for reading,
Qiongster