SINGAPORE (July 1): With its portfolio of suburban malls that rely less on tourists, Frasers Centrepoint Trust (FCT) is expected to see the fastest recovery from Covid-19, according to CGS-CIMB Research.

On that note, the research house is keeping its “add” call on FCT with a target price of $2.49.

FCT yesterday announced that it will be exercising its rights of pre-emption to acquire an additional 12.07% stake in AsiaRetail Fund (ARF) for $197.2 million. The acquisition is expected to complete in July and will increase FCT’s interest in ARF to 36.89% from 24.82%.

This, together with the holdings of Frasers Property Limited (FPL) of 63.1%, raises the group’s shareholding in ARF to 100%.

Based on its proforma estimates, the deal is expected to be slightly DPU accretive at 0.13%, while NAV remains unchanged.

In a Wednesday report, lead analyst Eing Kar Mei says, “We see this as one step closer to acquiring the assets under ARF which owns five suburban retail malls (Tiong Bahru Plaza, White Sands, Hougang Mall, Century Square and Tampines) in Singapore and one suburban retail mall in Malaysia (likely Setapak Central).”

Being purely in a suburban mall space, ARF’s portfolio fits well into FCT’s portfolio and if acquisitions materialise, would further enhance FCT’s position as a pure suburban mall landlord.

The analyst notes that quality malls in Singapore are hard to come by at reasonable prices, hence the potential acquisition of ARF’s assets are a good opportunity for FCT to widen its footprint in the suburban space and further underpins its income stability.

ARF’s assets attract strong traffic of 86 person per sq ft compared to listed malls’ 84 person per sq ft on average. Aside from retail malls, ARF also owns an office property, Central Plaza in Tiong Bahru, Singapore.

“The stock is trading at 1 time price-to-book value, slightly below its 5-year mean of 1.1 times. We believe its share price will be supported by the potential acquisitions of ARF assets,” says Eing.

As at 12.10pm, units in FCT are trading at $2.31 or about 1.1 times FY20 book with a dividend yield of 4.3%.