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Frasers Property kept at 'buy' by DBS with higher $2.30 target on PGIM stake purchase

PC Lee

SINGAPORE (Apr 11): Frasers Property Limited is set to become the second largest owner of retail properties in Singapore.

This comes after Frasers Property and Frasers Centrepoint Trust jointly acquired a controlling stake of 66.6% in PGIM Real Estate AsiaRetail Fund.

See: Frasers Property and FCT raise stakes in PGIM Asia retail property fund for $635 mil

“We believe this is positive with the strategic benefit outweighing the financial benefit,” says Tan.

With PGIM Fund’s Singapore assets, the group will become the second largest in Singapore retail.

And the potential Singapore pipeline available for FCT not only could bulk up FCT but could see FCT demanding for a higher premium to NAV.

For example, CapitaLand Mall Trust trades at 24% premium versus FCT at 10%.

In a Wednesday report, lead analyst Rachel Tan sees a window of opportunity for the group to capitalise on rise of its REITs’ share prices to grow their REITs AUM.

“One strategy will be to recycle mature assets (retail, hospitality, office and industrial properties) into its listed REITs to grow their AUM and at that same time, re-allocate funds towards higher return investments,” says Tan.

In addition, Frasers Property has limited exposure to Singapore residential property and its strong recurring income profile as a landlord in the commercial space.

Its valuation also remains attractive at 0.7x P/NAV and its dividend yield is the highest among developers at 5%.

DBS Group Research is maintaining Frasers Property at ‘buy” with a higher target price of $2.30.

As at 12.21pm, shares in Frasers Property are down 1 cent at $1.86.