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Thursday, June 30, 2016

Recent Action - Fraser Centerpoint Trust (FCT)

In my previous post, I wrote an article about how the market has been surging since the Brexit event takes place. It is indeed very surprising to me as with anybody why this is happening. This could very well be the start of a secular bull run continuing their rally since 2013.

During this period, I've divested a few rounds of FCT since I'm uncomfortable with the run-up. First, I divested my earlier stake of 7,000 shares at $1.985, and then today I divested another 8,000 shares at $2.11 and another 10,000 shares at $2.12. As of writing, I have NIL shares in FCT at the moment.

By divesting these shares, this is a part of my strategy to protect both my capital and profits and the proceeds would go to my savings which would be deployed upon available opportunity. Since Mr. Market is irrational in nature, the best way to take advantage of it is to exploit their weaknesses and be greedy when fearful, be fearful when greedy.




FCT management is aiming for a 9% increase in the rental reversion IRR for Northpoint once they completed their AEI. It's a positive shot for the long term though we are likely to see NPI compression for the next 3 quarters ahead.

The occupancy for Q2 would look to be at the lowest during the whole AEI, so we are likely to see a poorer earnings and a lower DPU in the short term. NPI is expected to reduce by about $1m in Q2 year on year so the impact should be minimal but given how they've been increasing every year, this should have a knee jerk reaction to investors who are short term minded. If that happens, that's probably a good entry time to load onto it more.



The NAV is currently at $1.91 which makes current share price valuation at a P/NAV of 1.12x which I think is slightly overvalued given the short to mid term headwinds. On the longer term, this should benefit from the integration of Woodland and Yishun integrated hub and I should be looking to re-enter closer to the NAV.


15 comments:

  1. Hi B,

    Thanks for sharing. Oh hindsight, my decision to go cash is unnecessary.

    But the most important thing is that when we make a decision, we got it wrong and still alive and kicking and continue to share for transparency...

    Keep it up. I am a bit tempted to take profits for MIT too, but decided against it

    ReplyDelete
    Replies
    1. Hi SI

      It is too early to say, the most important thing is you did what you need to be doing and that is allocating sufficient cash to equity ratio. No harm right since you still have lots of skin in the game :)

      Delete
  2. Hi b, I understand your divestment for capital protection but if fundamental is fine should we buy and hold instead of sell? Appreciate your inputs

    ReplyDelete
    Replies
    1. Hi Kelvin

      Ideally one should sell either if the thesis is invalidated or the valuation is no longer cheap and both. If you think that the long term valuation of the company is still cheap, i think you should hold onto it ;)

      Delete
  3. Have to wait for prices to factor in the drop in occupancy before jumping in. FCT is in my watchlist

    ReplyDelete
    Replies
    1. Hi SR

      I hope there will be a knee jerk reaction which will bring the price down from here. Lets see if it happens, i think 2.13 is pretty unsustainable and there is more risk than reward at this point.

      Delete
  4. Hi B,

    Good to see that u practising prudent capital recycling. I can also foresee possible knee-jerk reactions from the market due to the short-term AEI at Northpoint.

    Not adding anymore at current valuations for sure. But I am still holding on to my current FCT units as I am prepared to ride the volatility.

    Cheers! :)

    ReplyDelete
    Replies
    1. Hi DK

      I wished it didn't run up as much during the span of a short days and I will be able to keep it longer for the dividends. Once Mr. Market gives me the opportunity to take profits off the table at current valuations, I guess I will keep the cash for now.

      Hope to see you adding more to the company.

      Delete
  5. Hi B,

    Great minds do think alike! I have also sold off FCT at $2.11 :P. A bit overpriced and seriously what is the market up to?!

    ReplyDelete
    Replies
    1. Hi Heidi

      Ahh seems there are quite a few people taking profits off the table. Let's hope we are not wrong. Otherwise, we can miss a lot of potential dividends more to come for the company.

      Delete
  6. Hi B

    Is the market really ' irrational' and 'greedy' for you to be fearful at this point in time?

    Given the defensive nature of its assets, wouldn't it be better to hold it and accumulate the dividends over the years and add to the counter if it dips down.

    Or u think we would be better off taking profits and recycling capital?

    ReplyDelete
    Replies
    1. Hi Alfred

      Please dont get me wrong. I dont sell fct because im fearful of the market. I sold fct because i think the current valuation does not warrant the near term outlook. Sure, it is a very good long term holdings if you choose to stay away from the volatility of the market. I just happen to be more active managing than I like to be because i have a stretch goal I need to reach by this year and at the age of 35, so i need money to work overtime triple hard, compound on compounding effect. But i can almost see myself adding this back as fast as the valuation turns better in my favor and I will gobble them a lot :)

      Delete
    2. Hi Alfred

      Please dont get me wrong. I dont sell fct because im fearful of the market. I sold fct because i think the current valuation does not warrant the near term outlook. Sure, it is a very good long term holdings if you choose to stay away from the volatility of the market. I just happen to be more active managing than I like to be because i have a stretch goal I need to reach by this year and at the age of 35, so i need money to work overtime triple hard, compound on compounding effect. But i can almost see myself adding this back as fast as the valuation turns better in my favor and I will gobble them a lot :)

      Delete
  7. nowadays your holding periods seems very short, feels like u are more of a trader than an investor

    ReplyDelete
    Replies
    1. I am neither a trader nor investor. I am just a normal guy trying to make a living. Lets put it that simple.

      Delete

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