Frasers Property: S$1.28b rights issue to build resilience

Singapore

THE main goals of Frasers Property's S$1.18-per-share rights issue, set to raise up to S$1.28 billion, are to boost its business resilience through continued exposure to industrial, logistics and business park assets, build financial agility and strengthen its balance sheet for flexibility.

The equity fundraising exercise "is really not meant to address just the free float", as "there are many other things we're looking to address", said Uten Lohachitpitaks, group chief investment officer, during a virtual briefing on Monday evening.

There have been concerns that the property group's already small free float of 13.4 per cent might shrink further after the 37-for-100 rights issue and thus affect the stock's trading liquidity and shareholder returns.

TCC Assets (TCCA) and Thai Beverage Public Co (ThaiBev), which together hold 86.6 per cent of Frasers Property and have each undertaken to take up their pro rata share of the rights issue, could end up with nearly 89.9 per cent ownership if no minority shareholders participate. But Mr Lohachitpitaks noted that even if that happens, the company will still meet the 10 per cent free-float requirement set by the Singapore Exchange.

Besides, the rights issue is renounceable, and all shareholders have an "equal chance" to participate if they too believe in Frasers Property's strategy, he said. "We're also pricing it at a discount to our adjusted NAV (net asset value)... we think that's compelling to existing shareholders," Mr Lohachitpitaks added. The issue price of S$1.18 is 47.5 per cent below the adjusted NAV per share of S$2.25, calculated based on the unaudited NAV as at Dec 31, 2020 after adjustment to reflect the rights issue.

Frasers Property on Monday lodged the offer information statement for the fundraising, first announced on Feb 10.

More than half, or S$700 million, of the estimated S$1.28 billion in net proceeds will be used to capture growth opportunities by acquiring and investing in industrial, logistics and business park properties, as well as for capital expenditure in its development pipeline of such assets.

The group expects to deliver S$739 million of industrial, logistics and business park assets in Australia and Europe over FY2021 and FY2022, based on its development pipeline as at Dec 31, 2020. This pipeline includes S$569 million in gross development value of industrial and logistics projects, such as Horsley Park in New South Wales, Dandenong South in Victoria, and Roermond in the Netherlands, as well as S$170 million of commercial workload to be delivered in FY2022 from the Macquarie Exchange business park in Victoria.

Frasers Property will announce at a later date when it has confirmed details of how it will deploy the S$700 million of rights issue proceeds.

Growth opportunities have emerged in the industrial, logistics and commercial sectors, amid the shift towards e-commerce and evolving workplace trends, Frasers Property noted. Having seen an uptick in demand within these asset classes, the group thus took the opportunity to propose the rights issue now, "to grow along with that demand", Mr Lohachitpitaks said.

Meanwhile, about S$250 million or close to a fifth of the rights issue's net proceeds will be allocated as seed capital to establish private funds, joint ventures or similar arrangements to invest in property assets, including commercial and ancillary assets. Such capital partnerships are an important strategy for the group, Mr Lohachitpitaks noted.

Up to S$330 million or one-quarter of the rights issue's net proceeds will go into general corporate purposes, including working capital, transaction costs, strategic investments, acquisitions, fixed commitments, and development or redevelopment of existing assets.

Entitled shareholders, as at the record date of March 8 at 5pm, can begin to accept their rights shares and apply for excess rights shares from March 11, 9am, until March 25, 5pm. Listing and trading of the new shares is expected to start on April 5.

Shares of Frasers Property closed flat at S$1.19 on Monday.

READ MORE: Frasers Property's rights issue not a clear win for all