Finally acquire my first stock today, Frasers Centrepoint Trust (FCT)!
Does the logo looks familiar?
FCT own a number of shopping malls in Singapore - its most prized assets being Causeway Point and Northpoint.
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Why did I buy this stock?
1)
It meets all the criteria I stated in the previous post - strong
fundamentals, high dividends yield, and a solid blue-chip (>1 billion
market cap)
2) It is a defensive stock - even in
economic downturn, people will still visit shopping malls to eat and
watch movies. This fits my goal of holding an income generating asset
for very long term. As long as its fundamentals are good, I will hold it
and collect dividends till I'm 60 years old. :P
3) It
is the most defensive among all retail REITs due to its mall locations.
Unlike most other REITs, FCT mall cater more to the sub-urban, heartland
areas. It serves place like Woodlands, Yishun, Yew Tee - where they
have sole "monopoly". It's not like Jurong East where they have 5 malls
competing with each other for traffic.
4) It is
something I can understand, and I can see everyday! When I pass by
Causeway Point, I know how flooded the mall is. I can see how many
percent of the retail areas are rented out, etc...
5)
It has enjoyed very good "reviews". From the bloggers I followed to the
analyst reports that I read. Most notably, It just acquired Changi City
Point (at Expo) recently - which will spur its growth.
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So, that's the 5 main reasons I brought FCT.
In terms of technical, my personal valuation is this:
Disclaimer: These are based on a newbie opinon. Do not follow blindly.
P/E: 16.2
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Own adjusted calculation.
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NAV: $1.77
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Brought it at near NAV. Ideally I would have waited for a better
discount. However, I don't think it will drop any further in the short term.
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Gearing: 27.6%
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Extremely good. Typically REIT gearing is around 30 to 35%
This means there is more than enough debt head-room.
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Yield: 0.06
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Not the highest among all REITs. For a retail one, it is solid. It
will grow with the acquisition of CCP.
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Interest Coverage Ratio: 6
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Again, very good ratio. This means their earnings can cover the debt
interest 6 times. Anything above 5 is good.
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Estimated Margin of Safety: 43%
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Based on my personal extremely conservative calculation. Ideally, I
would have wanted around 67% - but you can’t have everything perfect.
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