Fraser and Neave

[winston]

Singapore F&N buys Allco REIT stake, manager for $132 mln

SINGAPORE, July 8 (Reuters) - Singapore conglomerate Fraser and Neave (F&N) said on Tuesday its property unit has bought 17.7 percent of Allco Commercial REIT and all of of the real estate investment trust's manager for S$180 million ($132 million).

Fraser's property unit Fraser Centrepoint said in a statement it would buy 125.6 million shares in Allco REIT for S$0.83 per share, and drop earlier plans for the listing of a commercial property trust.

It plans to rename Allco, which is a unit of troubled Australian asset manager Allco Finance Group , to Fraser Commercial Trust following the acquisition.

"Fraser Centrepoint...will be able to assist Allco REIT in negotiating the refinancing of its existing loans, which will bring clear benefits to Allco REIT's unitholders," Fraser Centrepoint Chief Executive Lim Ee Seng said in a statement.

Singapore's real estate investment trusts are expected to go through a round of mergers and acquisitions this year as weaker players find it increasingly tough to raise funds and refinance loans. [ID:nSIN295138] Fraser Centrepoint said it plans to grow Allco REIT by injecting a pipeline of its commercial property worth S$700 million, which was initially identified for its own REIT.

The company has a listed REIT for its retail properties, Frasers Centrepoint Trust , and said it intends to list a third REIT comprising serviced residences in two to three years, depending on market conditions.

[LenaHuat]

F&N has become more of a property player but not a first league player.
I'm not terribly excited abt a REIT comprised of serviced apts.
I'm glad that I've dumped all of my holdings.

[ehchang]

hmm... i am thinking of buying instead because of the restructuring. There is often enhanced value or growth opportunity after restructure.

this is proof that people can have entirely different opinion.

[LenaHuat]

Hi EhChang
Welcome to huatopedia

It's OK to differ. In fact, we should differ much here.
Read GR's comments in "What's in a Name?" thread. I've reproduced the last passage here:

只有在社会多元化发展的道路上，不断地创造出社会生活的丰富性，提高社会整体的福利水平，才能达到“每个人的自由发展为其他人的自由发展提供条件”的理想愿境。正是在这个意义上，能够最大限度地容纳人的创造性价值的大容世界，才是人类的“大同世界”。

[yinmeng]

For me, F&N decision to split conglomerate's core businesses - F&B, Property and P&P with 1 CEO for each is not just a normal restructuring story.

Consider the personality, his background and track record, and you can guess where this restructuring is heading.

If we look at FY07 turnover for F&B, Property and P&P - 53.3%, 34.8% and 11.3% respectively (remaining 0.6% is Others), I would think that P&P could be spinned off.

As for F&B, their main business - it is likely to be build up to a substantial and sustainable level of about 60% and Property to about 40%. And, my feel is that the Chairman may want to see results fast. So, I am keeping my F&N, and nibbling a bit more.

[kennynah]

yinmeng, ehchang

welcome to huatopedia !!!

[HengHeng]

Huat ah!!!

[winston]

Not vested. From Kim Eng:-

1) Fraser & Neave Ltd – Company update (Gregory YAP 64321450)
Previous day closing price: $4.39
Recommendation: Buy (maintained)
Target price: $6.00

We have a positive view of Allco REIT purchase
F&N intends to buy Allco Commercial REIT’s manager Allco Singapore and its 17.7% stake in the REIT for $180m. On completion, F&N will rename Allco Frasers Commercial Trust (FCOT), terminate FCOT’s listing and inject the three properties meant for FCOT ($700m NAV) into Allco. In one move, F&N will have gained critical mass of $2.7bn and delivered more than promised against its multiple-REIT strategy.

Purchase price is attractive
Even at the higher-than-market purchase price per REIT unit of $0.83, Allco yields 8.1% – one of the most attractive SREIT yields but one which is artificially high, in our view, mainly because of the financial troubles of its Australian parent Allco Finance Group. Furthermore, it represents a discount of 42% to the NAV of Allco of $1.44 per unit (as at 3/08).

F&N can drive further upside for Allco
F&N can help Allco further improve its yield by lowering its financing costs. Allco’s effective interest cost in 2007 was 3.3% (against average debt) while F&N’s own cost was 2.2%. Lastly, some of Allco’s assets are underperforming and can be divested before valuations dip further, such as an office complex in Canberra (Centrelink HQ) that was recently revalued lower by almost 14%. This will lower its gearing and reduce the dilution from likely fund-raising needed to acquire the assets from F&N.

Doubts over Allco’s parentage will be removed
We also expect F&N’s entry to remove the parentage overhang and boost Allco’s share price, lowering its yield closer to the estimated 6% net yield of F&N’s pipeline properties, which to date has yet to reflect positive rental reversions.

Maintain BUY
In conclusion, we believe that this is a win-win situation for both. The purchase price is attractive, and both sides gain from the transaction. First, F&N gains a fast-track path to add scale to its multiple-yield strategy. Second, Allco can benefit from F&N’s entry to improve its asset yield and gearing, as well as remove the parentage overhang.

[qxing78]

Suddenly, I have this weird idea.
If I am F&N management, maybe I will dump a few million dollars to block Pokka from delisting.
(market cap of whole Pokka only 55 mil, 10% of it only 5.5mil, problem is liquidity)
At least, F&N gets to view its accounts every year as it remains as a public listed company.

Read that Warrent Buffett like to buy 1 lot of its own company 's competitor, just to receive their annual report in hardcopy form (before Internet came about)

Ps: vested in Pokka, hoping for revised offer price

[millionairemind]

F&N Acquire 74%-stake in KS Realty
F&N’s subsi, Frasers India (I) entered into a conditional agreement with Kotak India Real Estate Fund-I and KS Realty Constructions to acquire 74% shareholding interest in KS Realty for a consideration of $30m. KS Realty is a company incorporated in India and owns land measuring 20.7 acres along Old Mahabalipuram Road in Chennai, India.