Frasers Centrepoint Trust Strengthens Suburban Retail Dominance with Northpoint City South Wing Acquisition
CGS International Research | March 25, 2025
Frasers Centrepoint Trust (FCT) has announced the proposed acquisition of a 100% stake in Northpoint City South Wing (NCSW), a retail complex in Yishun, for S$1.17 billion. This strategic move not only consolidates FCT’s position as the largest suburban retail landlord in Singapore but also promises to be DPU accretive.
Expanding Suburban Retail Footprint
The acquisition of NCSW, which forms part of the larger Northpoint City mall, will significantly strengthen FCT’s suburban retail portfolio. Upon completion, FCT will own the largest mall in northern Singapore, giving it a post-acquisition market share of 10.3% of the suburban private shopping centers by lettable area.
This dominant position is expected to enable FCT to leverage the growing catchment of resident population and upcoming developments in the North Region, further solidifying its suburban retail leadership.
Operational and Cost Synergies
According to management, NCSW has enjoyed robust growth in recent years, with a compounded average growth rate (CAGR) of 8.8% and 9.6% in tenant sales and shopper traffic, respectively, during 2020-2024. The property’s NPI also saw a CAGR of 8% over the same period.
The acquisition is projected to yield a 2% DPU accretion in FY24, with further upside potential from improved operating cost efficiencies and additional value-unlocking asset enhancement initiatives (AEIs). Management expects a potential 1.5-percentage point improvement in NPI margin due to cost savings from enhanced operational efficiencies across both the North and South wings of Northpoint City.
Prudent Financing Structure
FCT intends to finance the S$1.17 billion acquisition through a combination of equity and debt. This includes a S$400 million equity fund raising (S$200 million private placement and S$200 million preferential offering), additional debt financing, and the issuance of up to S$200 million in perpetual securities.
The proposed funding structure is expected to result in a proforma FY24 gearing ratio of 39.8%, up from 38.5% at the end of FY24, maintaining FCT’s financial flexibility.
Reiterate Add Rating
CGS International retains its Add rating on FCT with an unchanged DDM-based target price of S$2.68, pending the completion of the transaction. Investors are likely to reward FCT for strengthening its position as the largest suburban retail landlord, enabling it to benefit from a strong tenant network effect.
Potential re-rating catalysts include stronger-than-forecasted operational performance from NCSW. Downside risks include a slowdown in consumer spending that could weaken tenant sentiment and leasing, impacting FCT’s ability to command positive reversions.
