Hektar REIT rated a ‘buy’

By BUSINESS TIMES

AMRESEARCH Sdn Bhd has initiated coverage of Hektar REIT with a “buy” rating and target price of RM1.45, following the real estate investment trust’s (REIT) landmark deal with Frasers Centrepoint Ltd (FCL).

Hektar announced on Wednesday a strategic partnership with FCL, a leading Singapore property player, which has three levels of joint ventures.

Frasers Centrepoint Trust (FCT), which is a REIT sponsored by FCL, is acquiring 27 per cent of Hektar REIT for RM105 million, or RM1.21 per share.

FCL, meanwhile, will acquire a 40 per cent stake in the management company Hektar Asset Management Sdn Bhd.

There would also be potential joint ventures between the two parties to co-develop greenfield sites, creating assets for the REIT.

AmInvestment Bank Bhd, formerly known as AmMerchant Bank Bhd, is the placement agent for the deal.

“This is a landmark deal not only for Hektar but also for the sluggish broader REIT sector,” AmResearch said.

It said the entry of a financially strong corporate backed by global institutional investors should allay investor concerns over funding for future acquisitions.

AmResearch said Hektar also stands to gain access to FCT’s extensive tenant and retail base as this is a joint venture between two established suburban REITs.

“Backed by FCL/FCT now, we expect there to be more asset injections for Hektar to help it achieve its target to grow its asset size to RM2 billion by 2010, from RM523 million currently.

“We understand that Hektar is in various stages of due diligences to acquire 12 shopping complexes. Out of these 12 properties, three are in advanced stages of due diligence already,” it added.

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