Following a week of strong share price performance of FCL that started from the acquisition of Sydney Sofitel Wentworth, EGM notice for FHT and a feature in The Edge Magazine, I understand that there is a new coverage by a foreign house with a target price of $2.28.
FCL is edging closer to its reported book value of $2.17. As indicated in my previous posts, FCL has done all that it could in its short listing history as a relisted company to "rebuild" a track record that is previously hidden under F&N.
While it is convenient to forget or ignore FCL's contribution to F&N's former conglomerate history, there is no doubt that FCL has came a long way as a sizable Singapore based property company with global exposure.
With record share price, the main question on many minds would be - will any institutions in the right frame of mind buy when Thai Towkay is ready to dilute his tight holdings?
I am quite confident that TCC and all the team members have thought through the same question since they have their tasks cut down to convince potential institutional investors to buy from them at their price - a price that will not come cheap but certainly fair to those that will be parting a well run and tight ship.
FCL has no GLC linked pedigree but certainly the key personnels that have been at the helm has been focusing on delivering ROE and ROA as they lack historical landbank or assets to begin with. As F&N were previously ran by a professional board, the rigidity of making strategic business decisions at FCL is likely to be similar to that of F&N.
However, strict professionalism has also resulted in financial discipline that TCC has inherited:
i) focus turnaround of development projects in high landbank cost countries such as Singapore and UK to mitigate for the lack of landbank;
ii) focus country based outlook such as their shrewd reading of China property market that help lessen their exposure and their overweighted exposure in Australian market where property market is doing well especially in Sydney. I dislike to make comparisons but relative to Capitaland, FCL appears to be making decisions that have been well ahead and in tune with current market affairs;
iii) a complete suite of REIT platform for systematic enhancement of capital employed over time that will not devoid core earnings at parent levels while pursuing asset light strategies.
While many may argued that the lack of free float may have contributed to FCL price rising in a vacuum, early analysts from DBS, CIMB and now the rumoured foreign brokerage have all highlighted that FCL is a sizable multi-platform property company that institutions must eventually own - how not to own since its total market cap has already exceeded that of Kep Land and UOL in addition to the potential disappearance of CMA due to a possible delisting.
Post F&N, the sequential drama serial has been staged on FCL. Thai superman has his going smooth so far and who will argue that Mr Market is wrong in latest drama serial?
We just have to sit tight in our couches and not to be disturbed by noise and intermittent advertisements.
Vested
GG
(16-05-2014, 09:41 AM)greengiraffe Wrote: FCL has been featured in this week's Edge. The following is the summary:
Development Prop:
Singapore - looking to further shortened turnaround time for launch of sites secured. Aiming to rightly priced new launches than to make buyers of earlier phases feel betrayed by lowering prices if response is not good. Land costs in Singapore averages 60 - 80% of total development costs, hence turnaround time is crucial than landbanking which is an expensive and risky strategy. FCL has reduced the time from securing land to launch from 12 months to 8 months and is aiming to further reduce to 6 months. Remaining unlaunched site is North Point site but need to get temporary bus terminal up before any launch can proceed. Expected launch price - $1100/1200psf (quite a challenge IMO)
China - waiting for shoe to drop and FCL is well positioned given that they have reduced their exposure over last few years. China developments required clearances from various levels of government.
Australia - still good and main obstacles for development are not from government authorities but from green groups and neighbourhood concerns (aka human rights issue)
UK - focusing away from Central London and looking at south of River Thames and outskirts of London. Cited a pre-selling of entire block @ Vauxhall before development commenced.
REITs and pipeline:
FCT - after Changi City Point, they are aiming to develop North Point 3 (600000sf net lettable) that will eventually be injected to FCT
FCOT - Alexandra Point might be injected to FCOT while grade A office building @ Cecil Street also meant for FCOT in the future.
FHT - mgt feels that 22% holdings of FHT post listing sufficient as FCL controls 100% of the REIT manager.
Others - Centrepoint redevelopment not imminent as aiming to redevelop with Starhub Centre but unable to get enbloc at 44 units of Centrepoint Residence going.
Analysts viewed eventual placement by TCC/Inter-Bev post 9 Jul 14 positively.
Thanks Greengiraffe, Good read. I am vested too on FCL and will holding on at last to see the year end result to see how much dividend they are going to give.
Good that some brokerages are taking notice. However, this is not the foreign brokerage that initiated coverage last Friday
CSFB wrote on FCL with a "NON-RATED" rating:
● FCL was listed on 9 January 2014 as a result of a split of Frasers
and Neave’s (FNN) drinks and property business after Thailand’s
TCC took on a majority stake in FNN in 2013. TCC and ThaiBev
collectively control 88%, implying a ~12% float.
● FCL has been a more dominant SG residential developer with 13
projects currently under development. FCL has a total of 14 retail
assets (5 held via FCT), 11 office/business park assets (5 via
FCOT) and over 8,000 serviced apartments leased/managed or
owned, with 6,900 additional units signed-up serviced apartments
pending opening in the next three years.
● The proposed listing of a hospitality REIT (EGM on 28 May, IPO
2H14) is expected to hold 12 assets (6 serviced residences from
FCL and 6 hotels from TCC Group) located in Singapore,
Australia, the UK, Japan and Malaysia. FCL will hold ~22% of FHT
post IPO, whilst TCC should own >40%.
● Management would like to ideally increase its recurring income
and grow its investment properties to 60% of PBIT from 40%
currently, and indicated a “soft” net debt-to-equity target of 0.8x.
FCL, clsa initiated coverage with BUY in a 33 page report, target price $2.20:
Catalysts within sight
We initiate coverage of FCL with a BUY and target price of S$2.20 with
25% TSR. Our analysis suggests stocks with high free float trades at 20%
premium above illiquid peers and FCL could potentially narrow its current
valuation gap over larger peers. Given parent, TCC’s intent to increase
FCL’s free float, the imminent Reit listing, high presales locked in; as well
as an undervalued retail portfolio and a firm yield support of 4%, we view
FCL’s tighter discount of 35% against peers as deservedly justified.
A household name
Frasers Centrepoint Limited (FCL) is the former property arm of listed
conglomerate Frasers and Neave with an extensive portfolio consisting of
residential, commercial, retail and hospitality assets spanning across 19
countries with Singapore, Australia and China as key markets. Coupled with
high presales of S$2.8bn in unrecognized revenue and a low landbank (0.9mil
sqf) relative to peers, FCL’s earnings is firmly underpinned and relatively
insensitive to residential price declines in Singapore.
Retail assets offers significant upside through AEIs
FCL commands a 5.7% retail space market share placing it as the 4th largest
retail landlord in Singapore. With bulk of the exposure in suburban malls,
earnings are resilient. Furthermore, we believe its retail portfolio offers
significant opportunities to ramp up passing rents and capital value through
AEIs. Our analysis suggests FCL’s prime and suburban malls are still fetching
passing rents of 53% and 35% lower than peers respectively.
Hospitality Reit in the pipeline to unlock value
FCL targets to double its serviced apartment portfolio from the current 15,000
units to 30,000 units over the next three to five years through tapping TCC’s
huge portfolio of 9,882 rooms globally. This partnership will accelerate FCL’s
recurring income and smooth out earnings volatility. Meanwhile, the planned
Reit with an estimated S$1.7bn portfolio could shave FCL’s gearing to 33%
providing more room to sustain its guided dividend payout of at least 50%.
Initiate with BUY; S$2.20 TP; 25% TSR
We initiate coverage of FCL with a BUY recommendation and target price of
S$2.20 with 25% TSR. Our target price is pegged at 35% discount to FY15CL
RNAV of S$3.38/share, tighter than sector peers of 40% discount. Our
analysis suggests stocks with high free float trades at 20% premium over
peers which are illiquid. Given parent, TCC’s intent to increase FCL’s free float,
the imminent Reit listing, high presales locked in; as well as an undervalued
retail portfolio and a firm yield support of 4%, we view FCL’s tighter discount
of 35% against peers as deservedly justified.
It is interesting to see that FCL can rise so fast in such a short period, i believe it will lose steam very soon once it goes xd next week. Then again, i may be wrong
22-05-2014, 07:34 AM (This post was last modified: 22-05-2014, 07:45 AM by greengiraffe.)
if u need a comparison, simply go and look at UE. UE also staged an amazing run from early March and stayed right up there notwithstanding ex div (including special) and posted a small and insignificant 1Q14.
There is simply too much $ looking for safe harbours on the mkt recently.
I think smart $ has already started to reallocated their exposure from CMA to other big cap index components and potential rebalancing inclusions.
Vested
GG
(22-05-2014, 12:18 AM)money Wrote: It is interesting to see that FCL can rise so fast in such a short period, i believe it will lose steam very soon once it goes xd next week. Then again, i may be wrong
(22-05-2014, 07:34 AM)greengiraffe Wrote: I think smart $ has already started to reallocated their exposure from CMA to other big cap index components and potential rebalancing inclusions.
I concur.
The privatization of CMA, will release huge amount of smart $, which significant portion of it should be rebalanced into other similar stocks e.g. FCL
When will FCL join the STI components? I noted that its market cap has exceeded Olam and Comfort which currently on the list. And by the time FCL being included in the index, can we expect more bids from funds and ETFs?
(22-05-2014, 09:26 AM)valuebuddies Wrote: When will FCL join the STI components? I noted that its market cap has exceeded Olam and Comfort which currently on the list. And by the time FCL being included in the index, can we expect more bids from funds and ETFs?
When? I don't think anyone will be able to produce a reliable timetable, not even Mr. Towkay.
First of all, the free float issue has to be solved, before any visibility of it.
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