Saturday, 28 June 2014

Frasers Cpt Trust - Steady Income Growth Machine

Within the S-REIT Realm, retail REITs are probably the most price-resilient and DPU-defensive. Besides, the organic rental growth from retail properties is a natural hedge to inflation risk. Hence, it's not surprising that retail Reits have been a staple in investor's portfolio. In fact, the very first REIT traded in Singapore, CMT, is a retail trust. 

Among the retail REITs, Frasers Centrepoint Trust (FCT) is not a big brother in size. Its Market Cap is only about a fifth of CMT. It is also much smaller than Mapletree Commercial Trust, SPH Reits and Starhill Global Reits. 

Unlike its peers, many of which have jewel property such as VivoCity (MCT), or shopping malls in Orchard Road(SPH, CMT, StarHill), FCT's properties are all suburban malls. 

But small size also means it has potential to grow by asset acquisition. Recently, FCT has acquired Changi City Point and it has an asset pipeline from its sponsor. 

Many research reports issue "Buy" call on FCT. 
From OCBC Investment: 

From DBS Vickers: 

Take a look at technical chart. Daily chart shows some selling pressure from recent rise. The tech indicators are sending unclear signals: 20d MA turned down, MACD is turning up. It appears that 50d MA provided support. Note that volume is subdued. So the counter could continue sideline consolidation without new catalyst. Take note that new NAV after CCP acquisition is 1.79, which could serve as a benchmark for value investors. 

I have been adding FCT in my Reits portfolio. I have not sold any. I will continue to hold on for income. I like its steady fundamental and dividend growth prospects. 

FCT maybe one of the most defensive counter in S-Reits. But it is also prone to systemic risk factors. Fed's Jun meeting sounds dovish. As a result, 10 yr treasury yield retreated and USD is under pressure. Yellen said " everyting is possible and is data-dependent". However, QE tapering will continue, and no matter what path it takes, interest rate has to go up sooner or later. Hence, in next few quarters, all assets will face re-pricing when Fed decide to annouce a clearer path. S-Reits could face more volatility ahead. FCT will not be spared but I believe it will steer through the storm. 

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1 comment:

  1. What is defensive?

    1) Stock price not dropping more than XX% e.g. 20% from your purchase price


    2) Future dividends will not be cut more than XX% e.g. 20% from your yield on cost

    Good to know how newbie define defensiveness?


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