What Has Changed For Frasers Centrepoint Ltd?

Frasers Centrepoint Ltd (SGX: TQ5) has just completed its largest acquisition. Earlier this month, the company closed its offer for Australand Property Group via an off-market takeover at a price of AUD$4.48 per share in cash. The deal was valued at around S$3.0 billion. With such a massive deal, is the Frasers Centrepoint Ltd still the same Frasers Centrepoint Ltd we once knew?

Aussie, Aussie, Aussie

With the purchase, the company’s assets in Australia will be boosted by a wide margin. From its last quarterly report, Frasers Centrepoint Ltd (FCL) has S$1.9 billion of assets in Australia, about 16% of its total assets. However, if we add in the assets (AUD$4.14 billion) of Australand Property Group (obtained from its latest 2014 half year report), FCL’s assets in Australia might be enhanced to about S$6.6 billion. That is only slightly lower than the S$7.6 billion in total assets that the company has in Singapore. Investors need to be aware of the huge increase in exposure to the Australia’s property market going forward.

Asset management playing a bigger role

FCL divides its business into two main segments, the development segment and commercial & hospitality segment. Currently taking up 40-50% of the operating profit of the company, the commercial and hospitality segment might be gain a bigger role in the company with the listing of its newest Frasers Hospitality Trust (SGX; ACV) and the purchase of Australand Property Group.


Following the deal, the company is raising money through its Multicurrency Debt Issuance Programme to fund the purchase. It has already raised an additional S$600 million through 4.88% perpetual securities last week. As at 30th June 2014, the company already has a net debt position of S$3.2 billion and a net debt to equity ratio of 50%. As the company raises more debt to finance the purchase of Australand, investors should be prepared to see its net debt rising significantly.

Foolish Summary

Frasers Centrepoint Ltd has been transforming since the carve out from Fraser and Neave Limited (SGX: F99). Now with the purchase of Australand Property Group, it seems FCL has far greater ambition than just being a Singapore property company.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim owns Frasers Centrepoint Ltd.