Daiwa: Frasers Centrepoint Trust’s Waterway Point buy ‘doesn’t come cheap’

Waterway Point mall, by Frasers Property, at Punggol New Town in Singapore; taken August 2018.Frasers Property‘s Waterway Point mall at Punggol New Town in Singapore.

Frasers Centrepoint Trust is paying close to a full price for its acquisition of a one-third stake in Waterway Point mall, Daiwa said in a note Thursday.

“Waterway Point looks like a good mall but it doesn’t come cheap,” Daiwa said.

The trust announced Thursday it had entered a deal to acquire the Waterway Point mall stake for S$433.3 million from a subsidiary of Frasers Property.

Daiwa noted that the mall is already generating healthy monthly sales of S$85 per square foot, it said.

“We believe WP’s strategic location, size and the favourable demographics of Punggol and the surrounding townships are well known,” Daiwa said. “We also believe that no mall in Singapore is immune to retail-supply pressures regardless of how favourable its competitive
position might look right now.”

Frasers Centrepoint Trust said Thursday it would use an equity fundraising (EFR), consisting of a private placement and a nonrenounceable preferential offering, to finance the deal.

On Friday, the trust said it priced its private placement at S$2.382, the top of its S$2.30 to S$2.382 pricing range, after meeting with strong demand from new and existing institutional and other accredited investors

Daiwa said the EFR would create a short-term headwind for growth of the distribution per unit (DPU), and it trimmed its DPU forecasts for 2019-21 by 1-2 percent.

But it added, “improving FCT’s market cap, free float and trading liquidity is never a bad thing for a widely-held but still relatively small S-REIT.”

It kept a Hold call, and trimmed its target price to S$2.35 from S$2.39.

The unit was down 2.04 percent at S$2.40 at 2:28 P.M. SGT after resuming trading on Friday.

 

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