Frasers Centrepoint Trust: Strengthening Its Suburban Mall Positioning
RHB Investment Bank Berhad | 26 March 2025
Acquisition of Northpoint City South Wing Solidifies FCT’s Suburban Mall Dominance
Frasers Centrepoint Trust (FCT), one of Singapore’s leading suburban retail-focused REITs, has announced the acquisition of Northpoint City South Wing (NCSW) from its sponsor, Frasers Property Limited. This strategic move further cements FCT’s position as a dominant player in the suburban mall segment, offering investors an attractive opportunity to capitalize on the resilience of this market.
Key Highlights
- FCT to acquire NCSW for SGD1.1 billion (SGD3,754 per square foot of NLA), based on independent valuations.
- Acquisition expected to be mildly DPU accretive, with pro-forma (FY24) DPU accretion of around 2%.
- Significant operational cost savings and potential NPI margin expansion of 1.5 percentage points expected from the full control of Northpoint City.
- Tenant sales at NCSW have been growing at a 5-year CAGR of 8.8%, indicating higher rent growth potential.
- Post-acquisition, FCT will further cement its suburban mall pole position with an estimated 10.3% market share of overall NLA.
Consolidating Suburban Mall Dominance
The acquisition of NCSW allows FCT to further strengthen its dominant position in the suburban mall segment. With a larger scale and increased control over Northpoint City, the REIT is well-positioned to attract and retain high-quality tenants, elevate the shopper experience, and drive sustainable growth.
The transaction is subject to unitholder approval and is expected to be completed by the first half of 2025. FCT plans to fund the acquisition through a combination of equity and debt, including a SGD200 million private placement, a SGD200 million non-renounceable preferential offering, and potentially SGD200 million in perpetual securities, depending on market conditions.
Mildly DPU Accretive, with Significant Operational Synergies
While the immediate DPU accretion from the acquisition is relatively muted, FCT expects to realize significant operational cost savings and potential NPI margin expansion of 1.5 percentage points from the full control of Northpoint City. This, combined with the strong tenant sales growth at NCSW, suggests a positive long-term impact on the REIT’s distribution growth.
Addressing Market Concerns over Johor Bahru–Singapore Rapid Transit System (RTS) Link
The market has expressed concerns over the potential negative impact of the Johor Bahru–Singapore RTS Link on FCT’s Northpoint City mall. However, the REIT believes that these concerns are slightly overblown. FCT’s management expects the potential retail sales leakage to be offset by the significant planned increase in catchment population in the Northern region, no new supply, increased cross-border traffic, and Woodlands’ rising prominence as a regional commercial hub. Additionally, FCT’s large tenant and shopper base allow it to effectively reposition any generic trade segments that could be negatively impacted by cheaper cost alternatives across the causeway.
Maintaining a Buy Rating with Upside Potential
RHB Investment Bank maintains a Buy rating on FCT, with a new target price of SGD2.39, representing an 8% upside and a projected FY26 yield of around 6%. The acquisition of NCSW is seen as a long-term positive for the REIT’s DPU growth and share price performance, despite the mildly accretive nature of the transaction in the near term.
