Shoppers throng heartland malls even on weekdays, say CGS-CIMB, signalling rapid recovery for Frasers Centrepoint Trust (FCT), faster than its peers. The impact of Covid-19 on retail is slowly abating, write CGS-CIMB analysts Eing Kar Mei and Lock Mun Yee in an August 20 note, and “traffic should normalise” as capacity limits are lifted. 

Eing and Lock are reiterating “add” on the trust, with an unchanged target price of $2.78.

FCT is close to acquiring the remaining 63.1% stake in PGIM Real Estate AsiaRetail Fund (PGIM ARF), bringing suburban malls such as Tiong Bahru Plaza, Century Square, Hougang Mall, White Sands and Tampines 1 into its fold and doubling its assets under management (AUM) to $6.7 billion, making it the second largest retail REIT by retail AUM in Singapore.

Based on our analysis, FCT could digest the acquisition of the remaining 63.11% of PGIM ARF with 20% debt and 80% equity.

“The opportunity to acquire a portfolio of suburban malls is scarce as malls in Singapore are tightly held,” say Eing and Lock. 

Although weekday crowds were “good”, tenants revealed that sales are still below pre-Covid-19 level, say the analysts. “While PGIM ARF’s malls may not be the newest and most modern malls in Singapore, the malls capture good crowds as they are a stone’s throw away from MRT stations… All of the assets are located within five minutes walking distance of the MRT stations,” say Eing and Lock. 

“Four of the five assets are situated in low retail space per capita regions while three of the five malls are dominant malls and hence face little competition in their respective areas. Given the strategic locations, the malls command strong traffic of 78-95 person psf versus other listed malls’ average of 65 person psf.”

Since the malls reopened in mid-Jun 2020, traffic has seen a steady recovery with smaller decline in Jun (-51.8% y-o-y) and Jul (-38.9% y-o-y) versus -57.4% in Apr and -68.3% in May. “We understand that the main hindrances to traffic recovery were social distancing and capacity limit measures. Hence, we believe traffic should normalise when the capacity limit measure is lifted,” say Eing and Lock. 

As at 2.46pm, units in Frasers Centrepoint Trust are trading at 2 cents higher, or 0.84% up, at $2.39.