Frasers Centrepoint Trust (FCT) Acquires Northpoint City South Wing: Analyst Maintains BUY, Raises Target Price

UOB Kay Hian Private Limited 30 April 2025

Frasers Centrepoint Trust (FCT), a major player in Singapore’s suburban retail mall sector, continues to demonstrate resilience and strategic growth, reinforcing its position as the “Heartbeat Of The Heartland.” With a maintained BUY rating and an increased target price, FCT presents a compelling case for investors seeking defensive yield and exposure to Singapore’s robust suburban retail market.

FCT showcased strong operational performance, maintaining a high portfolio occupancy rate of 99.7% in the fourth quarter of FY25 1. The trust also achieved a positive rental reversion of 7.8% in the second half of FY24, indicating healthy demand for its retail spaces 1. A significant driver of growth was the 34.5% year-on-year increase in distributions from investments, largely attributed to the full six-month contribution from the additional 24.5% stake acquired in NEX 1.
Furthermore, the Asset Enhancement Initiative (AEI) for Tampines 1, completed in August 2024, has proven successful, generating a Return on Investment (ROI) exceeding 8% 1. Buoyed by this success, FCT plans to proceed with AEIs for NEX and Hougang Mall 1. The trust offers a defensive distribution yield, projected at 5.3% for FY25 1.

In a significant move, FCT has entered into an agreement to acquire 100% of North Gem Trust, the owner of Northpoint City South Wing (NCSW), from its sponsor, Frasers Property 1.

• Acquisition Value: The agreed property value is S\$1,133 million, which is 1.1% below the average of two independent valuations (S\$1,146m by Colliers and S\$1,120m by Savills) [[1]].
• Property Details: Located in the heart of the Yishun HDB estate, NCSW, combined with FCT’s existing Northpoint City North Wing, forms Northpoint City – the largest suburban retail mall in northern Singapore [[1]]. NCSW boasts a Net Lettable Area (NLA) of 301,579 sq ft across two upper and two basement levels [[1]]. It is part of an integrated development featuring the 920-unit North Park Residences condominium above the retail podium and is linked to Yishun MRT station via an underground link [[1]].
• Performance: NCSW was fully occupied as of December 2024 [[1]]. Its tenant sales in 2024 were remarkably 33.3% above pre-pandemic levels, outperforming comparable dominant suburban malls like Causeway Point and Waterway Point (which saw 21.6% growth) [[1]]. The property provides a Net Property Income (NPI) yield of 4.5% and has a remaining leasehold tenure of 89 years [[1]].
• Catchment Area Dynamics: The mall serves a densely populated catchment area with 10,214 people per sq km, nearly double Singapore’s national average (5,684) [[1]]. However, the area is underserved in terms of retail space, with only 2.0 sq ft per capita compared to the national average of 12.1 sq ft [[1]]. Limited new retail supply is expected in the primary catchment over the next five years [[1]].
• Growth Potential: NCSW is poised to benefit from significant population growth. The new 70-hectare Chencharu housing area within Yishun will introduce 10,000 new homes by 2040 [[1]]. The first HDB BTO project in Chencharu, launched in June 2024, offers 1,270 units [[1]]. CBRE forecasts the primary catchment population (within a 2km radius) to increase by 21.2% to 285,192 by 2031 [[1]].

The acquisition of NCSW aligns perfectly with FCT’s strategy of focusing on dominant suburban malls 2.

• Portfolio Enhancement: This move solidifies FCT’s position, making Northpoint City the 5th largest suburban mall in Singapore under its unified ownership (post-acquisition) [[2]]. FCT will own four of the top 10 largest suburban malls [[2]]. The acquisition is expected to expand FCT’s portfolio valuation by 21% to S\$6.4 billion and increase its market share of suburban malls from 9.3% to 10.3% [[2]].
• DPU Accretion & Leverage: Management estimates the acquisition to be accretive to the pro forma FY24 Distribution Per Unit (DPU) by 2.0%, bringing it to 12.28 S cents [[2]]. Pro forma aggregate leverage at the end of FY24 is expected to increase by a modest 1.3 percentage points to 39.8% [[2]].
• Approval & Financing: The acquisition is subject to unitholder approval at an Extraordinary General Meeting (EGM) scheduled for May 2025 [[2]]. Funding will be sourced through a combination of:
  • Private placement: 105.3m new units at S\$2.09 to raise S\$220m [[2]].
  • Non-renounceable preferential offering (54-for-1,000): 98.2m new units at S\$2.05 to raise S\$200m [[2]].
  • Perpetual securities: S\$200m with a coupon rate of 4.2% [[2]].
  • New SGD loans: At an interest rate of 3.25% (lower than the previous guidance of 3.4%) [[2]].

FCT sees significant potential to unlock further value through AEIs at the combined Northpoint City 2. Potential initiatives include:

• Creating an additional 8,000 sq ft of retail NLA by repurposing secondary corridors and non-commercial Gross Floor Area (GFA) [[2]].
• Optimizing the tenant mix via trade clustering, right-sizing tenancies, and revitalizing underperforming “cold zones” [[2]].
• Consolidating mechanical & electrical (M&E) systems across both wings for efficiency [[2]].

Northpoint City (combined) recorded an NPI margin of 72.7% in 2024. There is potential to improve this margin by 1.5 percentage points to 74.2%, aligning it with comparable dominant suburban malls [[2]].

FCT reported a solid DPU of 6.054 S cents for the first half of FY25, a 0.5% year-on-year increase and slightly ahead of expectations 2. Key highlights include:

• Strong Rental Reversion: Achieved +9.0% for 1HFY25, an improvement from +7.5% in 1HFY24 and +7.8% in 2HFY24 [[2]]. This was driven by positive reversions at Causeway Point (+10.0%), Tampines 1 (+13.3%), and Century Square (+11.6%) [[2]].
• Stable Occupancy: Committed portfolio occupancy for retail malls remained stable at 99.5% in 2QFY25 [[2]]. Causeway Point and Northpoint City North Wing maintained high occupancies of 99% and 100% respectively [[2]].
• Traffic and Sales Growth: Shopper traffic grew 1.0% year-on-year in 1HFY25 [[2]]. Tenant sales saw a healthier rise of 3.3% year-on-year, boosted by the completion of the AEI at Tampines 1 [[2]].
• Occupancy Cost: Average occupancy cost remained sustainable, dipping slightly below 16% in 1HFY25 [[2]].

Following the NCSW acquisition announcement and recent results, DPU forecasts have been raised by 5.8% for FY26 and 3.5% for FY27 2. This adjustment also accounts for an increase in the proportion of management fees paid in units to 56% for 2HFY25 and 1HFY26 (up from 20%) 2.
The BUY rating is maintained with a target price of S$2.73, derived using a Dividend Discount Model (DDM) assuming a cost of equity of 6.75% and a terminal growth rate of 2.5% 2.

FCT’s operational metrics reflect stability and proactive capital management.

*hoh % chg for DPU & rental reversions

• Tenure: 99-year leasehold commencing March 2015 (89 years remaining) [[2]].
• Description: Suburban retail mall with two upper and two basement levels [[2]].
• Location: 1 Northpoint Drive, Singapore 768019 [[2]].
• GFA: 482,406 sq ft [[2]].
• NLA: 301,579 sq ft (includes 8,492 sq ft community/sports facilities space) [[2]].
• Committed Occupancy: 100.0% [[2]].
• Key Tenants: NTUC FairPrice, Harvey Norman, Uniqlo [[2]].
• Car Park Lots: 484 [[2]].
• Connectivity: Yishun Integrated Transport Hub and Yishun MRT station (North South Line) [[2]].

• Continued growth in shopper traffic and tenant sales driven by domestic consumption [[2]].
• Full-year contribution impact from the additional 24.5% stake in NEX during FY25 [[2]].
• Successful execution of the AEI for NEX [[2]].
• NEX potentially obtaining tax transparency status [[2]].