Frasers Centrepoint Trust Acquiring 50% of NEX With Sponsor; Fiscal Q1 Business Update in Line

Frasers Centrepoint Trust, or FCT, is jointly acquiring 50% of a suburban retail mall, NEX, with its sponsor, Frasers Property Limited, or FPL, from Mercatus. After the transaction, FCT will hold a 25.5% interest in the retail mall while FPL will hold 24.5%. The remaining 50% is held between China Investment Corporation and PIM Foreign Investments. The agreed property value of the asset is SGD 2.1 billion and FCT’s total acquisition outlay, after acquisition fees, is about SGD 340 million. FCT’s management expects the deal to be mildly accretive, adding 0.52% to its fiscal 2022 (ending September) distribution per unit, or DPU, if the deal was completed on Oct. 1, 2021. We retain our fair value estimate of SGD 2.38 as we do not expect a huge change in future DPU after the transaction. However, we are positive on the acquisition as we think NEX is a high-quality suburban retail asset that efficiently and effectively serves its own submarket as a dominant shopping mall and hence, helps to fortify FCT’s narrow moat in efficient scale.