Analysts are positive on Frasers Centrepoint Trust’s (FCT) potential involvement in building the “next suburban retail landmark” at Bayshore, after a Frasers Property-led consortium submitted the highest bid of $2.13 billion in a tender that closed on July 15.
The 99-year leasehold Bayshore Drive mixed-use government land sales (GLS) site, which can yield up to 1,280 residential units and 242,190 sq ft of commercial space, will serve as the key hub of the new Bayshore precinct, which is expected to comprise around 10,000 homes.
A consortium comprising Frasers Property, FCT, Sunway MCL, Sekisui House and Lum Chang put in the top bid of $1,323 psf per plot ratio (ppr). If awarded, this would mark FCT's first development project.
Building a new mall in Bayshore “secures an additional future income stream at a lower cost than buying a completed one”, notes Jefferies Research analyst Wilson Ng. “However, there could be a near-term drag on distribution per unit (DPU) through the construction period.”
The development is to be integrated with Bedok South MRT Station on the Thomson East Coast Line. If awarded, FCT will develop and own 50% of the commercial component, which comprises 15% of the total gross floor area (GFA) and includes a retail mall with 160,000 to 180,000 sq ft of net lettable area.
Assuming the site is awarded, Ng estimates the near-term drag on DPU for funding the development could be up to 2%, before a potential 5% accretion once the completed mall starts generating income.
In addition, incremental debt to fund the project could bring gearing back up to 39%, estimates Ng. The sale of White Sands mall for $467 million, announced at the start of the month, would have brought gearing down from 40% to 37%, adds Ng.
Ng keeps his “buy” call and $2.55 target price on FCT.
DBS estimates $300 mil capital commitment
See also: FCT to divest White Sands mall for $467 mil; 8.4% above independent valuation
While this marks FCT's first development project, the execution and earnings risks are mitigated by its 50% interest, writes DBS Group Research’s Tabitha Foo. “We view FCT's participation positively, given its strong track record in managing suburban malls and as it expands its exposure to eastern Singapore, particularly following the divestment of White Sands.”
At around 170,000 sq ft of NLA, the retail component would be relatively comparable in size to Bedok Mall (220,000 sq ft NLA), adds Foo.
Based on DBS’s estimated retail gross development value (GDV) of around $550 million, FCT's capital commitment would likely be less than $300 million, which is less than 5% of its assets under management.
“While the development is likely to dilute earnings in the near term due to its extended construction and subsequent stabilisation period, we believe the impact should be manageable, with proceeds from the White Sands divestment available for redeployment,” adds Foo.
With a “buy” call, Foo’s target price on FCT is much higher, at $2.75.
Building new growth engines: RHB
Meanwhile, RHB Bank Singapore analyst Vijay Natarajan takes a big picture view on the stock.
He likes the Bayshore Drive GLS site’s “strong location attributes”, as it is set to be integrated with the upcoming Bedok South MRT Station and new bus interchange. He also points to the area’s “affluent neighbourhood”.
More details on its share of total development costs and future plans are expected to be shared in FCT’s upcoming 3QFY2026 results briefing on July 27, says Natarajan.
He praises FCT’s divestment of White Sands mall at an 8.4% premium to an independent valuation carried out in May, which promises an estimated net gain of some $32.4 million.
The exit FY2025 net property income yield of 4.6% is “in line with recent market transactions”, adds Natarajan. “More importantly, we see it as a strategic move to divest a mature mall (100% occupancy) with the lowest rent reversion (3.4% in FY2025) in FCT’s portfolio. The opening of Pasir Ris Mall in June 2024 nearby has intensified competition, reducing longer-term growth potential.”
The transaction will lower pro-forma DPU by 2%, assuming proceeds are used to repay its debt, with gearing to decline to 36.5%, according to Natarajan. “However, we see room for FCT to use some of the gains to offset near-term DPU dilution. The transaction is expected to be completed by September.”
Meanwhile, the asset enhancement initiative at Hougang Mall is nearing completion at an estimated return on investment (ROI) of 7%. Works have also begun at NEX mall with an estimated capex of $90 million and a similar 7% ROI target.
Causeway Point is likely next in the pipeline with potential to increase GFA and a “rejigging of trade mix on the cards” to better cater to changing retail trends, says Natarajan. FCT is likely to embark on this with the opening of the Johor Bahru-Singapore Rapid Transit System Link in early 2027, he adds.
Natarajan has a “buy” call on FCT with a target price of $2.69, which includes a 6% ESG premium based on the house’s proprietary methodology.
Units in FCT closed 1 cent lower, or 0.4% down, at $2.25 on July 16.
