Frasers Property (formerly: Frasers Cpt (FCL))

Lacklustre is not the right description for Australian property mkt.

I think mgt repeated what I have been posting on the conditions several capital cities in Australia:

i) Sydney doom will continue as demand is very strong due to a decade of under-supply as a result of "screwed up" in development approvals under the Labour govt. Labour rule from 1995 - 2011 and Liberal (aka PAP) assuming state leadership from 2011. Bouyancy in NSW prop mkt is largely due to change in state government. Simply because that NSW property mkt went to sleep in a "lost" decade and the price reversion to mean does not imply a "Bubble" as deemed by many external watchers. Australia is a big continent and even within each capital cities, the dynamics and drivers of the local property mkt is different.

ii) Melbourne property mkt over-supply is concentrated with the high rise segment within the inner city -this is inline with most of my readings and postings. So if anyone decides to go with newbies that decide where over-supply is the in-thing, so be it.

iii) with Australand - FCL has acquired a proven software and a development cum industrial portfolio. This is probably where the goodwill is being paid for... maybe fair market value. In fact they did quote an example on a landsite in NSW that a chinese developer is willing to double the market value just for the raw land and the development approvals - hence there could be value to be unlocked over time as developments are being rolled out over time.

iv) unlocking value of ALZ's industrial properties is definitely on track. Question here lies if it is a ASX listing where demand and appreciation of the quality is better or via FCOMM where it has a first right of refusal. However, do note that FCOMM do not have logistic / industrial exposure even though it has Australian office exposure by virtue of its previous legacy from Allco, hence there remains the possibility of a Australand REIT.

Posting these meeting, I m more confident of FCL and their rationale of acquiring ALZ. They are not fools. They will come good.

Having said that, mkt's perception of FCL is not something that long (wrong) term investors can decide. If FCL keep delivering the goods, then it will be a market inefficiency that is presented to investors looking for value.

Vested
Core
GG

(12-11-2014, 04:19 PM)piggo Wrote: Just attended the EGM. So many retirees waiting for food as usual. Some minority noises trying to fight for more dividends and some asking what's a perpetual security.

Suspect Bob (Australand exec) was expecting more substantial questions but was pleasantly surprised by such an easy work day.

Anyway, a summary is that FCL is working hard to realize value in Australand investment portfolio (divestment to FCOT etc.) and should have something in the next 12 to 18 months. They are also expecting cap rate compression to continue in Australia. Also to counter the lacklustre Australian property market, they are bringing forward developments to make use of the current market condition..

The CFO was emphasizing on the good cash flow visibility, and how it's an earning accretive acquisition etc. But at the moment, they are in no hurry to reduce leverage (don't see why they should?). About the constant badgering on dividends, he assured that there will be a final dividend.

U are a top bloke here mate...

I think any potential investors of FCL should take time to listen to your recordings.

Very informative and no distortion.

Thank You.
GG

(12-11-2014, 04:24 PM)piggo Wrote: For those who don't want to wait for the official version.
https://www.dropbox.com/s/4xx0jh42o79pn7...1.m4a?dl=0

> If FCL keep delivering the goods, then it will be a market inefficiency that is presented to investors looking for value

It will be interesting to see the type of Thai assets sold to FCL REITs and at what prices. I hope the REITs buy it at a good price and that may be even more compeling for institutions and others to join the party.

The CFO seem to stress on the dividend. Let's see the real meat in pudding when results are published.

(12-11-2014, 06:02 PM)greengiraffe Wrote: Lacklustre is not the right description for Australian property mkt.

......

with Australand - FCL has acquired a proven software and a development cum industrial portfolio. This is probably where the goodwill is being paid for... maybe fair market value.

They did their due diligence and did an independent analysis of the value of Australand (whether or not it is to be "extracted") and that the price they paid have "limited "downside". So I'd think their internal belief is that they got themselves a good deal with negligible "goodwill". But as they say, a 60m property can be worth 120m tomorrow (and can also be worth 60m the day after) things can be quite volatile and uncertain.

As for lackluster Australian property market, they have pretty much admitted that it's generally peak-ish in some of their markets which is why they are pushing ahead some developments and exercising restraint in acquiring new land banks. So it's more of a realization of value from their development and investment properties in the horizon until things improves down under.

For any of the REITs to be buying FCL properties, it'll probably be yield accretive which sets the baseline, pricing wise. Regardless looking at the gearing levels of all 3 REITs, all of which ranges somewhere from 30-40%, one wonders how much the REITs can handle. I'd put my money on them just sitting around and paying off the debt from their earnings.

The CFO stressed on dividends because one of the shareholders was quite upset at FCL's yield Don't think it'll be above the general 2-3% from property developers. If they can afford a nice dividend, they should delever instead.

Its a matter of half full or half empty...

Lim Ee Seng did mention that Australia is a mkt where long term demand is stable but margins are not comparable to the markets where cycle is more volatile (probably more land scarce like Singapore).

Australand as it is has a huge landbank. Developing it means securing the necessary approvals over time to launch them. When in Australia, the mentality towards development and even investment is different. Australian property market as a whole is a stable long duration type.

With the bang bang days behind Singapore property market, I think being able to hunt for a low beta but lucrative market over the long term is very important. FCL has taken the lead amongst many SGX listed property companies. With City Dev eager to establish a foothold Down Under simply explains the pressure on local property companies to expand beyond Singapore shores. Going a little further, when Chinese developers are also pursuing the Aussie foothold at all costs also help explain to a large extend that supernormal profit days in Chinese properties may be well behind.

On this account, I seriously wonder why did Capland divested ALZ just when the easiest journey has just started. Maybe like what the big boss up there thinks - its all about the bigger market in the Middle Kingdom.

Anyway, I never like crowd especially those led by Sovereign leaderships since their objectives and time horizons are clearly unappreciated by a small onbody out here.

GG

(12-11-2014, 06:55 PM)piggo Wrote:

(12-11-2014, 06:02 PM)greengiraffe Wrote: Lacklustre is not the right description for Australian property mkt.

......

with Australand - FCL has acquired a proven software and a development cum industrial portfolio. This is probably where the goodwill is being paid for... maybe fair market value.

They did their due diligence and did an independent analysis of the value of Australand (whether or not it is to be "extracted") and that the price they paid have "limited "downside". So I'd think their internal belief is that they got themselves a good deal with negligible "goodwill". But as they say, a 60m property can be worth 120m tomorrow (and can also be worth 60m the day after) things can be quite volatile and uncertain.

As for lackluster Australian property market, they have pretty much admitted that it's generally peak-ish in some of their markets which is why they are pushing ahead some developments and exercising restraint in acquiring new land banks. So it's more of a realization of value from their development and investment properties in the horizon until things improves down under.

For any of the REITs to be buying FCL properties, it'll probably be yield accretive which sets the baseline, pricing wise. Regardless looking at the gearing levels of all 3 REITs, all of which ranges somewhere from 30-40%, one wonders how much the REITs can handle. I'd put my money on them just sitting around and paying off the debt from their earnings.

The CFO stressed on dividends because one of the shareholders was quite upset at FCL's yield Don't think it'll be above the general 2-3% from property developers. If they can afford a nice dividend, they should delever instead.

(12-11-2014, 06:55 PM)piggo Wrote: [quote='greengiraffe' pid='99965' dateline='1415786577']
Lacklustre is not the right description for Australian property mkt.


For any of the REITs to be buying FCL properties, it'll probably be yield accretive which sets the baseline, pricing wise. Regardless looking at the gearing levels of all 3 REITs, all of which ranges somewhere from 30-40%, one wonders how much the REITs can handle. I'd put my money on them just sitting around and paying off the debt from their earnings.

The CFO stressed on dividends because one of the shareholders was quite upset at FCL's yield Don't think it'll be above the general 2-3% from property developers. If they can afford a nice dividend, they should delever instead.

FCL can do a share placement for the REITs... just like K-REIT. For their solid execution, there will be parties willing to take up the new units. the next 13 mths is the best time to flush down, before new REIT rules apply.

(12-11-2014, 06:55 PM)piggo Wrote: The CFO stressed on dividends because one of the shareholders was quite upset at FCL's yield Don't think it'll be above the general 2-3% from property developers. If they can afford a nice dividend, they should delever instead.

I thought the CFO gave some pretty good numbers to ponder on.

1) Recurring income to form 54% of earnings from 33%. That's a pretty high percentage of solid, tangible cashflow for a property developer. Usually these blokes have lumpy developmental profits or revaluation surplus (which is hardly ever monetised for the family-owned names), causing their EPS to fluctuate wildly and hence almost impossible to price on a PE basis. I think the profile of FCL's earnings might be pretty decent - with cashflows coming from their hospitality/service apartments + commercial/industrial ptf with long WALEs in Australia + management fees from their growing REITs (+possible Oz REIT?)

2) Supported by 1), the dividend policy is to pay up to 75% of EPS. I doubt 75% is rational, but even 40-50% of EPS is a pretty decent yield for a developer (look at what CDL is paying e.g.). Pro-forma EPS post acq+post perps is 14.4c, so if they pay 40-50% of this, yield works out to be ard 4% off a 1.58 stock price. That's rather decent-looking, and more importantly sustainable given they pay the recurring cashflow and reinvest the rest.

3) I do think they need to further delever, and the worries about an equity-raising is probably the main drag on the share price. But they also have a bunch of pre-sales locked in to stream in over the next few years to shore up the balance sheet, although it's unclear how much the net cashflow will be. I thought their perp was a pretty smart idea, to play for time waiting for the pre-sales to stream in, and redeem before the step-up kicks in.

Final dividends 6.2 cents! Cool!

6.2 cts final div, bringing full year div to 8.6 cts, a decent 5.4% yield.... Towkay quite generous in rewarding himself.....hehe

Result:
http://infopub.sgx.com/FileOpen/4Qtr-FCL...eID=324316

Press Release:
http://infopub.sgx.com/FileOpen/FCL_FY14...eID=324315

Presentation:
http://infopub.sgx.com/FileOpen/FCL_FY14...eID=324317

In Godfather I trust...

https://www.goodreads.com/work/quotes/26...-godfather

“I don't trust society to protect us, I have no intention of placing my fate in the hands of men whose only qualification is that they managed to con a block of people to vote for them.”
― Mario Puzo, The Godfather

No interest in vesting with Sovereign linked companies...

Salute Godfather Chaoren

Vested
Core
GG

(12-11-2014, 10:41 PM)desmondxyz Wrote: 6.2 cts final div, bringing full year div to 8.6 cts, a decent 5.4% yield.... Towkay quite generous in rewarding himself.....hehe

Result:
http://infopub.sgx.com/FileOpen/4Qtr-FCL...eID=324316

Press Release:
http://infopub.sgx.com/FileOpen/FCL_FY14...eID=324315

Presentation:
http://infopub.sgx.com/FileOpen/FCL_FY14...eID=324317