Frasers Centrepoint Trust (FCT) announced last Friday that it had increased its interest in Hektar REIT from 99.4m units to 124.9m units. The rise in unitholding was pursuant to the provisional allotment of rights units to FCT under the one-for-four rights issue and allocation of excess rights units by Hektar REIT. We are positive of this development as it presents FCT with greater opportunity to participate in the burgeoning retail market in Malaysia. Both malls are strategically located in areas with strong traffic catchment and offer good growth potential. Hence, while the acquisitions are not expected to have any immediate material effect on FCT’s distributable income, we expect FCT to benefit from Hektar REIT’s repositioning and upgrading plans and in turn an improvement in DPU going forward. We now factor in FCT’s increased interest in Hektar REIT and roll over our valuations to FY13, hence raising our fair value from S$1.89 to S$1.97. Maintain BUY.
Acquisition of Hektar REIT units
Frasers Centrepoint Trust (FCT) announced last Friday that it had increased its interest in Hektar REIT from 99.4m units (31.06%) to 124.9m units (31.17%). The rise in unitholding was pursuant to the provisional allotment of rights units to FCT under the one-for-four rights issue and allocation of excess rights units by Hektar REIT. As a reference, Hektar REIT had proposed the acquisitions of two retail mall properties, Landmark Central Property (LCP) and Central Square Property (CSP) for a total of RM181.0m, and the equity fund raising was done to partially fund the acquisitions.
Likely improvement in DPU by Hektar REIT
We are positive of this development as it presents FCT with greater opportunity to participate in the burgeoning retail market in Malaysia. Both malls are strategically located in areas with strong traffic catchment and offer good growth potential. According to Hektar REIT, the occupancy of LCP is likely to increase from 76.7% to 99.0% upon the commencement of tenancy by The Store on 15 Oct, while an intended refurbishment of CSP post acquisition is expected to enhance its rental rates. Hence, while the acquisitions are not expected to have any immediate material effect on FCT’s distributable income, we expect FCT to benefit from Hektar REIT’s repositioning and upgrading plans, and in turn an improvement in DPU going forward. As a note, the NPI of both properties comprised ~18.9% of Hektar REIT’s FY11 NPI of RM58.3m, based on latest available figures. This is relatively sizeable in our view.
Maintain BUY
We also like FCT for its pure suburban exposure, strong execution and sturdy financial position. We believe FCT will continue to gain from strong rental uplift at Causeway Point and incremental income from Bedok Point. Operationally, FCT is expected to show improvement in portfolio occupancy and track positive rental reversions. We now factor in FCT’s increased interest in Hektar REIT and roll over our valuations to FY13, hence raising our fair value from S$1.89 to S$1.97. Maintain BUY.
Frasers Centrepoint Trust (FCT) announced last Friday that it had increased its interest in Hektar REIT from 99.4m units (31.06%) to 124.9m units (31.17%). The rise in unitholding was pursuant to the provisional allotment of rights units to FCT under the one-for-four rights issue and allocation of excess rights units by Hektar REIT. As a reference, Hektar REIT had proposed the acquisitions of two retail mall properties, Landmark Central Property (LCP) and Central Square Property (CSP) for a total of RM181.0m, and the equity fund raising was done to partially fund the acquisitions.
Likely improvement in DPU by Hektar REIT
We are positive of this development as it presents FCT with greater opportunity to participate in the burgeoning retail market in Malaysia. Both malls are strategically located in areas with strong traffic catchment and offer good growth potential. According to Hektar REIT, the occupancy of LCP is likely to increase from 76.7% to 99.0% upon the commencement of tenancy by The Store on 15 Oct, while an intended refurbishment of CSP post acquisition is expected to enhance its rental rates. Hence, while the acquisitions are not expected to have any immediate material effect on FCT’s distributable income, we expect FCT to benefit from Hektar REIT’s repositioning and upgrading plans, and in turn an improvement in DPU going forward. As a note, the NPI of both properties comprised ~18.9% of Hektar REIT’s FY11 NPI of RM58.3m, based on latest available figures. This is relatively sizeable in our view.
Maintain BUY
We also like FCT for its pure suburban exposure, strong execution and sturdy financial position. We believe FCT will continue to gain from strong rental uplift at Causeway Point and incremental income from Bedok Point. Operationally, FCT is expected to show improvement in portfolio occupancy and track positive rental reversions. We now factor in FCT’s increased interest in Hektar REIT and roll over our valuations to FY13, hence raising our fair value from S$1.89 to S$1.97. Maintain BUY.
No comments:
Post a Comment