Pivoting Towards Dominant Suburban Malls
The acquisition of an additional 24.5% stake in Nex is accretive to pro forma 2023 DPU by 0.4%. We expect the acquisition to be completed in end-2QFY24 and contributions to kick in starting 3QFY24. NEX could be enhanced by: a) decanting existing carpark space for conversion into 60,000sf of commercial space, and b) rightsizing its tenant mix to reduce the reliance on anchor tenants. FCT provides defensive FY25 distribution yield of 5.3%. Maintain BUY. Target price: S$2.73.
WHAT’S NEW
• Rebalancing towards dominant suburban malls. Frasers Centrepoint Trust (FCT) has entered into a share purchase agreement to acquire an additional 24.5% effective interest in suburban mall NEX from sponsor Frasers Property for S$523.1m, bringing its effective interest to 50.0%. The agreed value for Nex is S$2,127.0m or S$3,352psf. Nex is the largest suburban mall in Northeast Singapore with total NLA of 634,631sf spread over seven levels, including two basement levels. It provided NPI yield of 4.8% for FY23.
• Benefitting from demographic tailwind due to strategic location. NEX is a dominant suburban mall in the Serangoon housing estate with an estimated resident population of 68,800 and 21,634 HDB flats. The vicinity has the highest population density of 19,600 per sq km, which is more than twice the national average of 7,500 per km sq. The size of the population catchment is expected to increase by 19,800 or 8.1% based on the supply of new residential units over the next five years.
• Excellent connectivity. NEX is located next to Serangoon MRT station, which connects to the North-East Line and Circle Line. In future, Cross Island Line will enhance connectivity and shopper traffic when phase 1 is completed in 2030. A new polyclinic with GFA of 150,800sf located opposite NEX is under construction and scheduled for completion in 2025. NEX’S high shopper traffic of 36m, which is equivalent to 3m per month, is a testimony to its central location and excellent transport infrastructure.
• Oriented towards essential trades. NEX’s key tenants include FairPrice Xtra, Food Junction, Isetan, H&M and Shaw Theatres. Its committed occupancy was 100.0% as of Dec 2026. Essential trades accounted for 48.6% of NEX’s gross rental income, which is in line with other comparable suburban malls. NEX’ occupancy cost is below FCT’s 15.7%, which provides more room to raise rentals.