Friday, November 25, 2016

Recent Action - FLT

Happy Thanksgiving Folks!!!

I was busy surfing around for deals in the internet for the kids edition of the fire kindle when I suddenly found a deal in FLT instead. Alright, I'll talk more about the Amazon buy in my next post.

I added 20,000 shares in FLT today at a price of 91.5 cents. I bought them earlier on the 15th Nov for 93.5 cents, so I'm just adding my tally to it.

I'm just going to write through briefly what I like about this company.




Pure-play Australian Industrial Portfolio

Let's face the truth.

The Singapore industrial properties are going to have a glut of supply in the next few years. Together with the poor economic forecast, this is going to get worse for the demand.

Depending on how you see it, this can also be a risk as the properties are concentrated in a single country risk. But already a few companies like Ascendas, Mapletree, AIMS and Cache are all already venturing into diversifying their assets moving into the Australian market. If this is not a sign of what is to come, then I don't know what else.

FLT's properties are concentrated in Victoria, New South Wales and Queensland, three of the major states in Australia where they are currently seeing more demand influx than supply.

Melbourne - Demand outweigh supply
Sydney - Demand outweigh supply
Brisbane - Demand outweigh supply

Long-WALE with positive rental reversion (built-in)

The current portfolio of assets are young with an average portfolio age of only 6.5 years, so there are hardly the need to go over for maintenance AEI capex.

The lease built-in are fairly long at a current WALE of 6.5 years. Compare this against the local industrial assets we have and you will see that most of them have less than about 3 years WALE running. AIMS has about 2.6 years while MINT has about 2.8 years. You see the same pattern running for Cache and also Sabana. The only exception is probably Ascendas, our big blue-chip player.

In addition to the longer WALE, FLT also has a 3.02% annual rental escalation built-in which gives a natural growth income to their current properties leased out. Comparing this with the other industrial reits, we can already see that most industrial assets in Singapore are already building in negative rental reversion, especially for flatter factories and Hi-ramps up building type. AIMS is venturing into a BTO, which probably gives them quite a good edge in terms of creativity and diversification.


Dividend Yield

I think this is a good base case to make my point on this article I wrote previously.

FLT dividend yield currently stands at about 7.1% while most other industrial reits are yielding a lot higher at 8 to 9%. Yield hungry folks would have run straight for the higher yield but the more pertinent question is what has not been accounted for.

In my case above, I am looking at a 7.1% + 3.02% annual growth reversion while most are looking at a potential 8% - Y negative reversion. What is better for you has to be decided on what you are comfortable with.

Cap Rate

Most of FLT's freehold assets are on a cap-rate of about 7%. 

When we compare this against the other industrial reits which has a leasehold of about 30 years in general yielding a cap rate of 8+%, it's good to start thinking which is the better return for the investor.

This also explains why most industrial reits are yielding higher than their other compatriots like retail or offices.

Gearing

I guess this is straightforward.

Most of the gearing I've seen for industrial reits are at a comfortable level and hardly anyone is gearing above 40% at the moment.

FLT is currently geared at about 28.2% with a cost of debt of 2.8% and an interest coverage of 7.5x. That's a rather good level for me.

Mapletree companies typically have a lower cost of debt and they tend to gear up more.

Forex

I used to be skeptical of foreign exchange risk in the past because of the fluctuations.

These days, management have largely hedged their exchange risk so the fluctuations would be minimal.

Even so these days, with the SGD generally weakening, it appears that being Singapore concentrated is not necessarily a good thing.

Summary

All in all, I'm likely to hold the company for the yield play since it's fairly stable which doesn't need me to monitor the company too much.

Operationally, they also deliver on their performance that are better than the forecast during the IPO so that gives me a lot of comfort knowing what they put out there in the prospectus is not some hard selling numbers.


27 comments:

  1. B : nice addition.. one small suggestion, next time can include the full name or the counter code next to the abbreviation (at least once) so the readers don't need to second guess it ? :-p

    ReplyDelete
    Replies
    1. Hi Richard

      I'll keep that in mind for sure :)

      And yes its Fraser Logistic Industrial Trust.

      Delete
  2. Yup agree as I don't know what FLT stand for

    ReplyDelete
    Replies
    1. Hi Yew Khim

      Thanks for the suggestion, I'll keep it in mind.

      Delete
  3. Hi B ,
    Good summary on this counter (FLT:Fraser Logistic Trust ) ...I am watching this closely as well...may nimble some in near future ..
    Cheers 👍👍

    ReplyDelete
    Replies
    1. Hi STE

      You must be already monitoring cos you know what FLT is!!! Haha just kidding. Do let me know if you decide to add this onto the portfolio. I am guessing you are awaiting for higher yield to come.

      Delete
  4. Gearing is considerably Low at 28.2% as compared to other industrial REITs. FLT is a good form of diversification from Singapore market. Alternatively is Mapletree logistic trust

    ReplyDelete
    Replies
    1. Hi SR

      Yes MLT is another form of diversification outside SG, I do like them too along with MINT.

      Delete
  5. Frasers Logistics & Industrial Trust (“FLT”)

    http://www.fraserslogisticstrust.com/about-us/overview/

    ReplyDelete
  6. Hi B,

    It is amazing we have the same watchlist/target companies. Your recent transactions are involving companies I am actively looking at or bought and intending to buy more. Reading your posts is almost like reading my mind on which stocks to buy, so much so it is abit creepy lol

    Great minds think alike or fools seldom differ, I sure do hope its the former haha

    DS

    ReplyDelete
    Replies
    1. Hi DS

      High five!!! :)

      Hope it will work well for us otherwise we need to service our mind for brainwashing hahaha. Good to see you around :)

      Delete
  7. u still holding half cash, can't wait to see the bull come and you missing the boat gg

    ReplyDelete
    Replies
    1. Hi Meow2

      My cash is slowly depleting actually. I have no worries about missing the ride if any :)

      Delete
  8. looking ahead, should'nt we be reducing weightage on reits as bond yields only just bottomed out?

    ReplyDelete
    Replies
    1. Hi Soonyuen

      You are right actually. As bond yields start increasing, the equity premium needs to get larger so this will apply to all equities.

      What was previously a good 7% under ZIRP shouldnt be the same under a rising interest rate environment. I do look forward to that though since it means it will boost all equity premium upwards.

      Delete
  9. Ya!

    The market is in "Shorting Mood" especially for REITS

    Of course Mr. Market can be wrong too!

    ReplyDelete
    Replies
    1. i almost increase my FLT holdings to when it's price reaching IPO's price.

      My wife CPFIS's 25K.@IPOed price

      My only Cash Acct. 2K@IPOed price because i KK B & S 50K at BREXIT.

      Stupid me lol!

      Of course if my trading (aka guess right) then i was smart lol.

      Anyway, sucks at guessing games.
      (No offence to traders)

      No guessing this time for USAexit

      Delete
    2. Hi Uncle Temperament

      I think we had such an eventful 2016 that its a bit frustrating to miss the jan drop but yet failed to see following event brexit and trump becoming a non event.

      In any case, those are simply missed opportunities, though at least we cover what we have and dont lose them.

      Delete
  10. Hi B, do you have any rough idea how much will borrowing costs increase in the near future due interest rate hike? Thanks.

    ReplyDelete
    Replies
    1. Hi Anonymous

      That's a good question.

      Flt borrowings are in AUD and they have a natural hedge. I suspect it will not go up as fast as what people predicted as the country is still struggling with their own economy. I believe it might stay below 3% for a considerable period of time.

      Delete
    2. Hi B, would you consider to buy some areit since the yield is around 7% and it is a blue chip.. Thanks. VJ

      Delete
  11. Hi B, would you consider to buy some areit since the yield is around 7% and it is a blue chip.. Thanks. VJ

    ReplyDelete
  12. Hi B, is the dividends of FLT quarterly or half-yearly?

    ReplyDelete
    Replies
    1. http://investor.fraserslogisticstrust.com/faq.html

      Delete
  13. typically, if your cash on hand is always rising in the course investing, you are ok.
    if the opposite happens, its better to stop and do a check.

    ReplyDelete
  14. This comment has been removed by the author.

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