Monday, January 20, 2014

AGM - FraserCenterPoint Trust (FCT)

Welcome to the Annual General Meeting (AGM) series of review for FCT.



Today, I am going to summarize the AGM for FraserCenterPoint Trust (FCT) held at Alexandra Point. I was expecting a lot of questions from the retail investors relating to Bedok Point and Changi City Point bombarding the management so let's see if I'm correct.

This is my first time going to the FCT AGM despite having the shares for more than 3 years. So you can expect me getting a little excited about it. Talking about the souvenier, I was a little disappointed, just like most investors out there. Perhaps a voucher at any FCT malls would have been great :). But it turns out that they have given out "Angbao" considering that Chinese New Year is just round the corner. Anyway, it's not a big deal. So let's move on.




CEO Welcome Address

The CEO Dr. Chew, began by highlighting some of the achievement FCT has achieved in the past 1 year. Unless you are new to the Trust, I believe you would have known that FCT has made some of the biggest achievement this year, achieving record high in multiple areas. To recap and for the benefits that are new to this Reit, here are the figures highlighted:


  • DPU record high 10.93 cents - C.A.G.R of 8.9% over the past 7 years
  • NAV = $1.77 as of 30 Sep 2013
  • Average rental reversion = 7.7%, higher than industry average
  • Portfolio Occupancy - 98.4%
  • NPI increases lower than Gross Revenue, indicating that margins are slightly dropping due to more competitive pressures.

Then before we proceed with the voting of the resolutions, there is the common Questions & Answers session.

Q&A

As expected, a couple of questions were relating to the lacking performance of Bedok Point as well as the acquisition of Changi City Point, so I will be consolidating the questions for the respective area for the ease of the readers.

Bedok Point

Bedok Point has come under huge pressure lately due to its underperformance relative to other FCT malls. And as we all know this is due to pressures coming from main competitor Bedok Mall from the CapitaMallTrust (CMT). One investor raised question regarding the sustainability of the mix of tenants currently at Bedok Point, with more than 42% mix of tenants coming in from Food & Beverage. How will management get the right mix of tenants for Bedok Point?

Dr. Chew reply was that given some of these 42% leases which are expiring, they have secured tenants mainly from the IT sector with names ranging from Harvey Normans and Challenger. The management are also putting focus on educational tenants as they feel that it will be a good diversification away from what Bedok Mall can offer. He further mentioned that by being the "No. 2" malls within the vicinity, it can offer tenants cheaper rental and thus will benefit the tenants and traffics in the long run. Having said all that, Bedok Point constitutes only about 6% of the overall FCT portfolio, so he assured investors not to be overly worried about it.

My verdict: Fair enough. There is some tough competition out there against CMT's Bedok Mall. And given that occupancy rate for the mall is still above 96% and with the mall constitutes 6% of the overall portfolio, we should not expect management to put in majority of resources to challenge competitor.

Changi City Point

For all shareholders of FCT, the question that are on everyone's mind is when will management be going to inject Changi City point into FCT portfolio and this question has not escaped once again. Another investor also raised the question that given the unsuccessful venture into the east, will Changi City Point be underperforming similar to Bedok Point? Will FCT be paying a premium for the mall?

Dr. Chew reply was simple. Changi City point is a crown jewel project that will be injected into FCT portfolio in time but he is not willing to provide any time frame. He further mentioned that the main primary catch about this mall is the vicinity of the office (Changi Business Park) and Expo crowd that brings the traffic in almost everyday and not just on weekends. He also assured investors that they will consider the price to acquire Changi City Point very carefully and not overpaid for it. According to some investors, they have paid somewhat a premium for Bedok Point.

My verdict:  I think the time has come to inject Changi City Point into FCT portfolio. With no AEI project going on at any of the other malls and with DPU pressures from the dropping rental at Bedok Point, it seems that in order to increase DPU there is only one way out, i.e to inject Changi City Point sooner the better.

Causeway Point & Northpoint

One investor raised a question which I thought was interesting. He mentioned that traffic at Northpoint (41.7 Million) almost doubled that of Causeway Point (23.4 Million) despite the mall smaller than the latter. Are there further growth for traffic at Causeway Point?

Dr. Chew replied that Yishun community area is bigger than Woodlands, so it is inevitable that the traffic at Northpoint is much more than Causeway Points. In fact, as a matter of choice, FCL is going to build another mall in the Yishun area to accommodate the rising population in that area. But this time it will be different. Unlike Bedok Point who is competing directly with competitor Bedok Mall, Northpoint will be competing against one of its own FCL mall, which one day will be injected into FCT.

My verdict: I think it is a good strategy for FCT to focus on the North population. As we all know, the West is mostly dominated by CMT malls so it will be hard to venture at the West. The East is probably more like 50-50 right now, so its a more fair competition.

Costs of Borrowing

One investor also raised a question about the impending interest rate increase and how it will impact FCT borrowing costs and DPU eventually.

For FCT investors, you would have known that the trusts have a 93% fixed borrowing rate at 2.73% with maturity over the next 2-3 years. So short term interest rate increases are unlikely to impact much the earnings and hence DPUs for investors.

There are other couple more questions relating to the fees and other AEI plans but thought they weren't that useful so I will not be mentioning them. As always, I will be grateful if any of the investors out there who attended the AGM can give some insight to the overall session you've attended so as to increase further awareness of the points I've brought up. 

And oh, as I was walking out of the building, glad to meet Simon_84 from the hardwarezone forum. Hopefully, you can add or correct anything that I've missed ;) Hope the summary has been helpful for those who wants to go but miss the AGM.


6 comments:

  1. Hi B,

    Thanks for the write up on today's AGM.

    I just read their report. Hmm, quite satisfied with their results.

    One of the questioning point will be BedokPoint. BP occupancy rate drop from 96.7% to 80.2%. That is quite a drastic drop. According to their report they say it is due to vacancy of expired leases and renovations of incoming tenant. I hope the management can provide an alternative solution to fight off the stiff competition from Bedok Mall. Yes I hope they will introduce a mix of tenant (IT / Educational sector) that is different in their own way as compared to BM.

    Cheers!

    ReplyDelete
    Replies
    1. Hi littleboy

      When I went to the agm the management has assured investors that they hv found a suitable tenant in the form of harvey norman and challenger to occupy the empty leases so I hope that will bring the figure back up to the 90% over.

      I hv not personally gone to bedok point to be honest so I cant say muchabout the mall. Maybe I will try to give it a visit one of these days to have a real feel of what is everyone talking about.

      Delete
  2. A tuition mall can sometimes be a quiet mall. Depends. Let's hope they get it right for BP.

    ReplyDelete
    Replies
    1. Hi Anonymous

      A tuition mall gives a different feel to the mall. For e.g United Square is full of tuition mall and it can give a different kind of mall to competitor.

      Delete
  3. Hi there,

    Good article but I live in bedok. You should check out Bedok Mall and Bedok Point. The latter is very quiet and not many shoppers seen around.

    Regards,
    Gerald
    SG Wealth Builder (www.sgwealthbuilder.com)

    ReplyDelete
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