Thursday, February 9, 2017

FCL - Q1 FY17 Results & Thoughts

I initiated the purchase of this company not too long ago last Oct which I have written here. Since then, the company has dished out a dividend of 6.2 cents and are now sitting at around $1.60.

The company announced its first set of results for FY17 yesterday and I will just take the highlight of what I see from the report.

1.) Npat for the quarter jumped up 90.1% year on year

This will be mostly the headline that everyone will see and focus on the news but it warrants a deeper look what the increase is due to.

As it is, these gains are mostly from the completed sale of their development sales in Suzhou and Songjiang. These will be lumpy in nature and will be non-repetitive, so we shouldn't expect similar gains in future period.

2.) Australia remains a key market for residential and industrial 

The company continued to replenish their land banks by purchasing the land at Wyndham Vale for a purchase price of $457m. They also made a land bank purchase at Mulgrave, Berrinba and Horsley Park. There is an unrecognized revenue of $2.9 billion as at 31 Dec 2016.

Sydney and Melbourne, the two main cities for the industrial properties they had, have compressed to about 6% in rental yields.

3.) Diversification into Thailand

The company recently completed a strategic investment joint venture with Ticon Industrial and Golden Land Property in a bid to increase their exposure for industrial and hospitality into Thailand. One of the reason for the substantial increase in net profit is also due to the latter as they recognized profit contribution from their Golden Land associates.

4.) Total Assets In Terms of Geographical

Singapore remains the key major assets especially with Northpark residence, Northpark retail and Fraser Tower to be completed within next 2 years hence profit from these contributions will start to kick in.

Meanwhile, the company started ramping up their diversification towards Australia, China and Thailand.

5.) Focus into recurring income sustainability

The management is putting this as one of their focus key drivers.

By recurring, it means including part of their income stream from the Reits and management fee income. For this quarter, they managed a recurring income of $65.6m.

6.) Consistent Dividend Yield Payout

Still, something which investors are looking out and focusing on.

The company has made 3 consecutive years of 8.6 cents dividend since listing, which translates into a respectable 5.8% yield.

For 8.6 cents, they would require $250m to payout. If we annualized the recurring income portion, it would be sufficient to pay this amount out. Hence, I believe they will continue to pay 8.6 cents for a longer time to come.

7.) Net Interest Coverage at 14x

Many people continued to worry about its high gearing but we can see that the company is comfortable to repay off the interest costs which the coverage is at 14x. This is higher than most reits listed out there.

Final Thoughts

I am vested with 10,000 shares and this is still a hold for me.

I still think the company is faring well and the decent dividend yield will propel me to continue staying with the company for some time.


  1. i think they consolidate their reits. So the 'recurring' income they are talking about is mostly the profits from its REITs, which they dont own 100%. i imagine management fees to be a small proportion vs the property PBIT.
    Not sure if you proportionate the dividend upstream from its listed REITs, will FCL still be able to maintain the dividend

    1. This is actually a good point. How I get my head around this is to look at the cash flows from financing activities (reference to FY2016 AR). There are 2 items being disclosed 1) Dividends paid to shareholders and 2) Dividends paid to non-controlling interest (I assume these are distributed to the REIT unit holders). Sum these up and compare that against total recurring income in FCL. For FY2017, we just need to annualised the figures accordingly and assume same dividend payout to FCL shareholders. Not sure if this makes sense.


  2. Hi

    My impression is the consolidated only happens at the balance sheet level then eliminated. As for pnl, i thought they would have taken the net of what they own less non controlling shares to derive at the "profit" they earned.

    The other management income is indeed too small to make an impact.

  3. B,

    since have you both FCL and FLT, would this is somewhat of an overlap? since FCL is the mothership of FLT. no doubt they have different type of assets. just wondering, as i am still trying to figure out which would be the best way to get vested in Fraser, since they have a few "Frasers" and FCL would seem the most "obvious", as they hold % of each of the spin off.

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