Frasers Centrepoint Trust (SGX: J69U), or FCT for short, is a real estate investment trust (REIT) that owns retail assets in Singapore. Its portfolio comprises six suburban retail properties – Causeway Point, Northpoint City North Wing, Anchorpoint, YewTee Point, Bedok Point and Changi City Point, with a total combined appraised value of S$2.75 billion as at 31 December 2018. The REIT also owns investments in Hektar REIT (KLSE: 5121) and PGIM Real Estate AsiaRetail Fund.
FCT has a long and enviable track record of raising its dividends every single fiscal year since listing, which is impressive considering the malls are mainly heartland malls and that the REIT has made only one acquisition (that of Changi City Point in 2014) since its IPO. Investors may be wondering if this superb track record can continue. I believe the answer is “yes”, and below I detail the reasons why I think this is the case.
FCT’s dividend history
Looking at the above table, we can observe that FCT has increased its distribution per unit (DPU) from 7.51 Singapore cents back in FY 2009 to 12.015 Singapore cents in FY 2018. This is a cumulative increase of 60% in its annual DPU and represents a compound annual growth rate (CAGR) of 5.4% over nine years.
Here are two key reasons why I believe FCT can continue its impressive track record of dividend growth.
1. Potential injection of property from sponsor
FCT’s sponsor is Frasers Properties Limited (SGX: TQ5), also known as FPL. FPL is a diversified property conglomerate with properties in Southeast Asia, Australia, Europe and China, spanning 80 cities in total. With such a strong sponsor, there is always the possibility of asset injections into the REIT and this will save the manager of the REIT the hassle of looking for promising, yield-accretive acquisitions.
Recently, FCT announced the purchase of a 33.3% stake in Waterway Point by FPL for S$433.3 million. There is still another asset – the South Wing of Northpoint City (SWNPC) – that was only opened in December 2017, which has yet to be acquired by the REIT. The eventual acquisition of SWNPC should provide a further boost to DPU, in addition to the REIT’s stake in Waterway Point.
2. Growth of recent acquisitions and related assets
On 28 February this year, FCT announced that it was acquiring a 17.1% stake in PGIM Real Estate AsiaRetail Fund (PGIM). This company is an open-end private investment fund and is the largest non-listed retail mall fund in Singapore. PGIM owns and manages six retail malls six retail malls in close proximity to MRT stations (Tiong Bahru Plaza, White Sands, Liang Court, Hougang Mall, Century Square and Tampines 1) and an office property (Central Plaza), as well as four retail malls in Malaysia. PGIM is managed by the real estate investment arm of Prudential Financial, Inc (NYSE: PRU).
The rationale for this acquisition is to increase the distribution per unit for FCT and also to diversify in order to mitigate its concentration risk. In addition, FCT’s 31.1% stake in Hektar REIT, or Hektar for short, is set to perform better as Hektar is looking to double its asset value from the current RM 1.2 billion to RM 2.4 billion by 2026 through acquisitions. Hektar currently owns six shopping centres valued at RM 1.2 billion.
Stay tuned for the next part where I’ll talk about another two reasons why I believe FCT can continue to increase its dividend.
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The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. Motley Fool Singapore contributor Royston Yang does not own shares in Frasers Centrepoint Trust. The Motley Fool Singapore has recommended shares of Frasers Centrepoint Trust.