Frasers Centrepoint Trust - RHB Invest 2023-01-30: A “NEX” Surprise But At Tight Pricing

• Frasers Centrepoint Trust's announcement of acquiring a 25.5% stake in the suburban mall NEX came as a surprise. Overall, we are neutral on the deal – while we like the long-term strategic fit and synergies, tight pricing and high funding costs limits yield accretion.
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NEX acquisition is a long-term gain.

• Frasers Centrepoint Trust (SGX:J69U) (51% interest) and its sponsor Frasers Property (SGX:TQ5) announced the acquisition of a 50% stake in NEX at an agreed purchase price of S$2.08bn (S$3,274 per NLA). The acquisition is at par with NEX’s latest valuation but this is also 6% higher than the mall’s appraised value in 2021 – and translates to high 4% NPI yield (estimated at ~4.7%).
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• NEX, however, is an excellent strategic fit for Frasers Centrepoint Trust, and offers good synergy due to its dominant profile in northeast Singapore, as well as its good connectivity (it sits on top of two Mass Rapid Transit lines). It is 99.9%-occupied at present, and has a remaining lease period of 85 years. It also has a high Green Mark rating.

Mildly yield-accretive, with a post-acquisition gearing of 38.5%.

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