Frasers Property (formerly: Frasers Cpt (FCL))

[TUBInvesting]

I did a comparison of FCL against OUE, UIC, CapitaLand, Far East Orchard.

and Fraser Centrepoint Ltd was chosen because;
- I believe, for Blue Chips, Price to Earning and Dividend Yield plays a larger part in determining future share price. Thus, since Fraser Centrepoint Ltd has the lowest Price to Earning Ratio as well as a decent dividend yield last year, thus it is chosen;
- Sponsor of 4 REITs;
- Current Price is very close to 52 weeks low and also historically low;

http://tubinvesting.blogspot.sg/2016/10/...raser.html

For some of the calculations in the post, it may differ from your figures.

PM me if you want to know more!

<Vested>

[BlueKelah]

I did a comparison of FCL against OUE, UIC, CapitaLand, Far East Orchard.

and Fraser Centrepoint Ltd was chosen because;
- I believe, for Blue Chips, Price to Earning and Dividend Yield plays a larger part in determining future share price. Thus, since Fraser Centrepoint Ltd has the lowest Price to Earning Ratio as well as a decent dividend yield last year, thus it is chosen;
- Sponsor of 4 REITs;
- Current Price is very close to 52 weeks low and also historically low;

http://tubinvesting.blogspot.sg/2016/10/...raser.html

For some of the calculations in the post, it may differ from your figures.

PM me if you want to know more!

<Vested>

You said it yourself,  this stock is Overleveraged. 

What happens to overleveraged companies when some unforseen circumstances requires it to raise cash?  

What happens if interest rates suddenly rise rapidly?

The property sector is also doing all time highs in some markets which FCL is playing in, what happen when those markets revert to mean?

This is one blue chip with pretty high risk profile IMHO (dun forget Noble in its blue chips heyday) and asking for money left and right, already 2 bonds last year and 1 bonds this year lol..

But good luck to all those vested. Hopefully Central banks continue to keep interest rates low and negative.

[MINX]

I did a comparison of FCL against OUE, UIC, CapitaLand, Far East Orchard.

and Fraser Centrepoint Ltd was chosen because;
- I believe, for Blue Chips, Price to Earning and Dividend Yield plays a larger part in determining future share price. Thus, since Fraser Centrepoint Ltd has the lowest Price to Earning Ratio as well as a decent dividend yield last year, thus it is chosen;
- Sponsor of 4 REITs;
- Current Price is very close to 52 weeks low and also historically low;

http://tubinvesting.blogspot.sg/2016/10/...raser.html

For some of the calculations in the post, it may differ from your figures.

PM me if you want to know more!

<Vested>

You said it yourself,  this stock is Overleveraged. 

What happens to overleveraged companies when some unforseen circumstances requires it to raise cash?  

What happens if interest rates suddenly rise rapidly?

The property sector is also doing all time highs in some markets which FCL is playing in, what happen when those markets revert to mean?

This is one blue chip with pretty high risk profile IMHO (dun forget Noble in its blue chips heyday)  and asking for money left and right, already 2 bonds last year and 1 bonds this year lol..

But good luck to all those vested. Hopefully Central banks continue to keep interest rates low and negative.

You raise a good point. I also wonder if they are a tad too gungho in their expansion. If interest rates head north and things turn sour, they could be in a tight spot. 

[thor666]

You raise a good point. I also wonder if they are a tad too gungho in their expansion. If interest rates head north and things turn sour, they could be in a tight spot. 

From my notes of FCL 2014 agm, management did mention that they are comfortable with higher gearing. Gearing as of fy15 is abt 84%, and i assume current gearing is at 100+-% with the recent acquisitions but spinoff of Fraser logistics trust.

I reckon there is far more risk involved at the reit level than at the parent company. Chairman has heavy ownership and will likely defray risks via the reits.

(vested but yes, open for discussion and great point from bluekelah for risk assessment.)

//
My previous post in 2015:
- Concerns on gearing. (CEO)<br />
Mgmt highlight historical records, no right issue raised during gfc, property is capital-intensive business. Gave example, post GFC FCL was 1.1X debt gearing. Prior to Australand acquisition, gearing was 0.4X. In between, unlike other companies, FCL did not issue rights issue.<br />


Sent from my LG-H818 using Tapatalk

[TUBInvesting]

I did a comparison of FCL against OUE, UIC, CapitaLand, Far East Orchard.

and Fraser Centrepoint Ltd was chosen because;
- I believe, for Blue Chips, Price to Earning and Dividend Yield plays a larger part in determining future share price. Thus, since Fraser Centrepoint Ltd has the lowest Price to Earning Ratio as well as a decent dividend yield last year, thus it is chosen;
- Sponsor of 4 REITs;
- Current Price is very close to 52 weeks low and also historically low;

http://tubinvesting.blogspot.sg/2016/10/...raser.html

For some of the calculations in the post, it may differ from your figures.

PM me if you want to know more!

<Vested>

You said it yourself,  this stock is Overleveraged. 

What happens to overleveraged companies when some unforseen circumstances requires it to raise cash?  

What happens if interest rates suddenly rise rapidly?

The property sector is also doing all time highs in some markets which FCL is playing in, what happen when those markets revert to mean?

This is one blue chip with pretty high risk profile IMHO (dun forget Noble in its blue chips heyday)  and asking for money left and right, already 2 bonds last year and 1 bonds this year lol..

But good luck to all those vested. Hopefully Central banks continue to keep interest rates low and negative.

I agree with your view and I am someone who hates leverage. But I did look very in-depth into this issue prior to my investment.

In my opinion, its a risk that I took because Fraser centrepoint actually did not do any rights issue so far. It had only sell bonds. Technically I am not affected.

Secondly, to raise cash, Fraser Centrepoint can always sell one of its mature properties to one of its REITs.

If you look at the number of properties it have, the possibility is very high that it will sponsor its REITs to raise cash instead.

I could be wrong, but I think the funds from Fraser Logistic Trust is not totally recorded.

Anyway its a risk I took on.

<vested>

[money]

You raise a good point. I also wonder if they are a tad too gungho in their expansion. If interest rates head north and things turn sour, they could be in a tight spot. 

From my notes of FCL 2014 agm, management did mention that they are comfortable with higher gearing. Gearing as of fy15 is abt 84%, and i assume current gearing is at 100+-% with the recent acquisitions but spinoff of Fraser logistics trust.

I reckon there is far more risk involved at the reit level than at the parent company. Chairman has heavy ownership and will likely defray risks via the reits.

(vested but yes, open for discussion and great point from bluekelah for risk assessment.)

//
My previous post in 2015:
- Concerns on gearing. (CEO)<br />
Mgmt highlight historical records, no right issue raised during gfc, property is capital-intensive business. Gave example, post GFC FCL was 1.1X debt gearing. Prior to Australand acquisition, gearing was 0.4X. In between, unlike other companies, FCL did not issue rights issue.<br />


Sent from my LG-H818 using Tapatalk

IMHO, i think there is a limit to how much risk can be defrayed to the reits. Leverage is sexy when earnings keep flowing in but it screws you up when earnings dry up. There is no shortage of examples, i.e. noble , many many O&G companies, i think hyflux is going to look interesting in the years to come

[piggo]

This is an era of persistently low rates everywhere... if this isn't the time to leverage up, when is?

[weijian]

You raise a good point. I also wonder if they are a tad too gungho in their expansion. If interest rates head north and things turn sour, they could be in a tight spot. 

From my notes of FCL 2014 agm, management did mention that they are comfortable with higher gearing. Gearing as of fy15 is abt 84%, and i assume current gearing is at 100+-% with the recent acquisitions but spinoff of Fraser logistics trust.

I reckon there is far more risk involved at the reit level than at the parent company. Chairman has heavy ownership and will likely defray risks via the reits.

(vested but yes, open for discussion and great point from bluekelah for risk assessment.)

//
My previous post in 2015:
- Concerns on gearing. (CEO)<br />
Mgmt highlight historical records, no right issue raised during gfc, property is capital-intensive business. Gave example, post GFC FCL was 1.1X debt gearing. Prior to Australand acquisition, gearing was 0.4X. In between, unlike other companies, FCL did not issue rights issue.<br />


Sent from my LG-H818 using Tapatalk

The acquisition of F&N by Towkay a few years ago and subsequently spin off of FCL, had its intense discussions on VB. Just wondering with what has transpired in the last 2years when the acquisitions of Australand and certain Thai entities, would there be a need to review the structure of FCL again, with regards to how the OPMI is aligned with that of Towkay C?

[BlueKelah]

You raise a good point. I also wonder if they are a tad too gungho in their expansion. If interest rates head north and things turn sour, they could be in a tight spot. 

From my notes of FCL 2014 agm, management did mention that they are comfortable with higher gearing. Gearing as of fy15 is abt 84%, and i assume current gearing is at 100+-% with the recent acquisitions but spinoff of Fraser logistics trust.

I reckon there is far more risk involved at the reit level than at the parent company. Chairman has heavy ownership and will likely defray risks via the reits.

(vested but yes, open for discussion and great point from bluekelah for risk assessment.)

//
My previous post in 2015:
- Concerns on gearing. (CEO)<br />
Mgmt highlight historical records, no right issue raised during gfc, property is capital-intensive business. Gave example, post GFC FCL was 1.1X debt gearing. Prior to Australand acquisition, gearing was 0.4X. In between, unlike other companies, FCL did not issue rights issue.<br />


Sent from my LG-H818 using Tapatalk

Regarding rights issue, in my knowledge FCL was part of F&N until Thai boss took over in 2013 and spun in off in 2014. So any argument that no rights issue during GFC times is not valid. The beverage business before 2012 was a cash machine even in GFC times and hence I dont think F&N encountered any sort of cash flow problem to fund their gearing.

The other argument about selling to REIT to raise capital during crisis times will be valid depending on how highly geared those REITs are. If interest rates go up lets say to 2-3% will all those REITs suddenly have funding pressures of their own and have to raise capital via rights issues? In which case will they even have funds to buy any big property from FCL? Perhaps some of those vested here will know the gearing levels of those REITs and share.

Lastly this thai boss probably knows what he is doing, and in low interest rate environment it is a good chance to leverage up when credit is easy to obtain and service, but do you think he will continue on his expansion spree which will likely put more downward pressure on share price? 


A bit of background from wiki on the bosses way of doing business: 
[Since the Asian financial crisis of 1997 and attempts to further liberalize Thailand's competition laws in 1999, Charoen has on occasion been able to use his political connections to increase his dominance over the country's alcohol industry.


Charoen reportedly launched a campaign of resistance against the liberalisation of the local whisky market in the late-1990s and early-2000s. He was reportedly able to do this due to his increasing clout since the Asian financial crisis, which saw him rescue hundreds of politically connected, debt-ridden Thai companies and projects. This includes the acquisition of the large Bangkok IT shopping mall Pantip Plaza from Chalermchai Vaseenont, who set regulations for the local liquor industry in his capacity as a former director general of the country's excise department at the Ministry of Finance.

Charoen's assistance has brought certain "bureaucratic paybacks". For example, following the liberalization of the Thai market, the government implemented several tough new environmental regulations for the construction of new plants, making it very difficult for new rivals to enter the liquor market. Charoen was able to avoid these new regulations as he had won all 12 bids for the previously government-held distilleries it ran on concession.

His assistance during the financial crisis has also reportedly brought him some level of protection from media criticism: a programme on a military-controlled radio station was, for example, allegedly taken off the air after it ran an unflattering report on Charoen that included allegations of tax evasion.

Several competitors have protested against some of Charoen’s activities. Boon Rawd Brewery, the producer of Singha beer, complained to Thailand's Fair Trade Department in October 2000 about Charoen's dumping of cheap products on the market, which the company claimed impeded competition. Charoen was warned that his actions were "inappropriate"; however, the department eventually ruled in his favour after claiming that no law had been violated as regulations regarding the issue had not yet been finalised. Thailand's commerce minister allegedly did not participate in the deliberations and the details of the decision-making process have never been made public.]

[In December 2000 Carlsberg and Chang established a 50/50 joint venture, Carlsberg Asia, to create a significant brewing company in Asia.[7] The Carlsberg influence can be seen in the typography of the "Beer Chang" logo, which resembles the classic "Carlsberg Beer".[8] In 2005 Carlsberg pulled out of the venture and terminated its licence agreement with Chang due to non-fulfillment of contractual obligations, resulting in Chang claiming US$2.5 billion in damages.[7] A final settlement of US$120 million was subsequently paid by Carlsberg.]

[TTTI]

This is an era of persistently low rates everywhere... if this isn't the time to leverage up, when is?

The time to leverage up is when interest rates just dipped below 1%, when the liquidity is rising, but asset prices havent shot up that rapidly.
Leveraging up now, potentially may be very dangerous.
You could be the guy adding air into the inflated balloon... just before it bursts.

I don't mean that for FCL, no idea about the company.
I mean that for one's personal capital allocation