Recently, I downloaded all the past years annual reports of Fraser Centrepoint Trust (FCT) and did some analysis on them. The reason was because I thought of initiating a position in FCT and I was wondering at what price I should enter.
FCT has always been on my radar screen and I had bought a few lots of it last year and sold them as soon as it reached my target price. It was more a speculative play than a purchase for real income investment. And part of the reason was because I did not carry out detailed analysis of the company yet. I have decided to spend some time and effort to do it this time.
As a quick intro,
FCT was listed in 2007 on the Singapore Stock Exchange. It currently owns stakes in six sub-urban shopping malls in Singapore. Causeway Point and Northpoint make up a significant portion of its revenue and income. The rest is made up of Changi City Point, Bedok Point, Yew Tee Point and Anchor Point. It also holds a 31.2% stake in the Malaysia-listed Hektar Real Estate Investment Trust.
Based on the 2016 annual reports,
- It had a market capitalisation of $ 1.8 Bln as at 31 Dec 2016. It is not exactly in the “big boys” league but it is also not a small shrimp either.
- It enjoys a more recent historical property income yield of 4.9 to 5.3%, comparable to most other retail mall reits but it is clearly a shade lower than Capitaland Mall.
- Gearing ratio was one of the lowest at about 28% (😉 blink blink lots of headroom for acquisition if opportunities arise) with an amazingly low-cost of debt at 2.1% (I wonder how did they do it!)
- Net Asset Value was 193 cents (versus the current share price of 209 cents)
- Dividend per share was 11.8 cents (i.e a yield of 5.6% based on current share price)
- FCL is the sponsor and also the largest shareholder at ~ 38% and Schroder Investment is the other substantial shareholder at ~ 5%.
So what impressed me?
- Its Dividend Per Share has been climbing uninterrupted every year since 2008 at 7.3 cents to 2016 of 11.8 cents. This implies an average annual growth rate of 6.2% over those 8 years – which is very impressive!
- It has growed its asset value uninterrupted annually too, from 122 cents per share in 2009 to 193 cents today. The average annual growth rate over that period is 6.65% – also a very impressive track record.
- In delivering these impressive performance, the gearing for those years has been kept low relatively to its peers. It has been hovering around 30% or lower.
- Cost of debt is also relatively low at the low end of 2+%
- It does not usually raise capital from the market or carry out dilutive right issues. In the last 4 years, it had only one right issue that raised $ 161 Mln from the market. The right issue was made amazingly only at a few percentage discount to the market price, not like of the huge haircut that we saw on those. But in those same 4 years, it returned $ 308 Mln as dividends to shareholders, far outpacing the capital received from right issue.
Obviously, all these achievements do not come easily. In my opinion, the management of FCT is doing a great job and their ability to deliver such performances year in year out is simply superb! I hope the FCT can continue to retain these managers.
It’s Action Time –
#1 So, will I buy FCT?
#2 Will I buy it now?
- I will wait 😊 it’s share price has increased quite a bit lately
- When I compare its current dividend yield to its 3 years historical range, it is on the low side. Current yield is 5.6% while the historical range is 5.3 to 6.7%.
#3 So what will make me start to accumulate it?
- When FCT share price drops below 196 cents at current dividend per share
- If FCT announces its dividend share is 12.5 cents and current share price holds (fat hope???) – so I am eagerly watching out for their quarterly results release.
#4 Alternate thinking …
- If I am aggressive, I will even consider accumulating at current level because FCT’s track record shows that it can increase DPS by ~ 6% a year. And if it does then it’s current share price is close to my target yield. Maybe I will buy a few lots when it shows some temporary weakness around current share price.
- If I want a bigger safety margin, then I will wait for the price to drop to 185 cents or below. That will be a “steal” if it really happens.
Well, it looks like I have a plan – I am ready and it feels great!
Hope it has been useful to you too.
If you have any views, I welcome you to share it with me. Thank you.