Sunday, 28 October 2012

Review of FY2012 results: Frasers Centrepoint Trust

Frasers Centrepoint Trust (FCT) announced stellar FY2012 results last week.

Picture of Causeway Point from

FCT is a REIT that earns income primarily from the rental of the tenants in its suburban malls.

(1) Causeway Point       Occupancy: 87%
(2) Northpoint               Occupancy: 99%
(3) Yew Tee Point         Occupancy: 96%
(4) Bedok Point            Occupancy: 99%
(5) Anchorpoint            Occupancy: 98%

Some key numbers (based on FY2012 financial statement & presentation slides)

Number of shares issued (including treasury shares): ~824m
Current share price: S$2.00
NAV: S$1.53
Net Income + distribution from Hektar: $78.3m ($0.095)

I would like to take this chance to share my own experience on my decision-making process with FCT since its now my biggest holding

Background history on the purchase of FCT

In 2009 May, the REIT market was generally in the doldrums due to frozen credit facilities. This stoked fears that the property owners may experience inability to refinance their mortgage loans.
REITs usually trading at 4~5% yield were trading at abnormally high yields ranging from 10% to 20% then! It was a rarely seen opportunity .
Reality was, I can choose to take action and buy.
But the question was which REIT can best grow my money?
I chose retail malls as their income sources are the easiest to analyze and see. ( investment philosophy 2:

I was deciding between FCT and CMT. I ended up chosing FCT simply because it had malls situated near my home and i could study occupancy easily.
(a) It did not have major refinancing needs near term and unlike CMT, did not do any rights issue due to its prudent gearing levels.
(b) FCT's pipeline for acquisition was clear too, with Yew Tee Point & Northpoint 2 next in line.
(c) Though Northpoint 1 was undergoing intense AEI, FCT's  other malls were having healthy occupancy too.
(d) It had smaller number of shares outstanding compared to bigger REITs like Suntec/CMT. Thus, it implies future earnings growth will lead to bigger impact on EPS/DPU.

Probably i was lucky but looking back from now til 2006, the management performed extremely well. Since inception til now, FCT never once did a rights issue. And even when private placements were done for acquisitions, DPU for existing shareholders increased year after year! The existing shareholders never lost out.

My decision to enter FCT involved hours of homework, mall-walking to check on occupancy, speaking to investor relations, doing projections of future income (simple/common sense ones) versus current valuations.

I bought 100 lots of FCT since 2009 in various batches. My average price being $0.94.

My yield on cost (based on $0.10 DPU) is a cool 10.6% p.a.
Though I have sold 35 lots along the way to recycle capital (should have held on to them! but well, shouldn't be too greedy ya!), I am thankfully still holding on to 65 lots. 

My concluding thoughts & future outlook

Frasers Centrepoint Trust continues to be well poised for future growth  via:
A) Organic -  Definite increase in occupancy in CWP plus stepped-up rentals
B) Potential Acquisition - Changi City Point (possibly debt + equity financing)

Caveats though, would be if:
A) Share price hits exuberant levels, causing yield compression to below 4%.
B) Rental price increases cause more vacancies.

For now, the growth trajectory for FCT is pretty clear and straightforward ---> DPU increment!


  1. Fabulous on FCT!!!

    Congrats. The best of the best even when market is down, it is still resilient. I see probably CMT as the benchmark for FCT. Once it breaks CMT, resistance would be evident.

    1. Thanks B.
      Its resilient earning profile makes it a great bargain for investors if people do panic sell it.
      I'll be watching to load up on this if that happens. :-)