Tuesday, March 5, 2019

Recent Action - Frasers Logistic Trust (FLT)

I wanted to take this time to quickly update on my latest position. 

After the recent run-up to most of the S-Reits which I believe is near valuation peak over the past 10 years (apart from 2015), I have decided to lock in my gains and divested Frasers Logistic Trust (FLT) yesterday at a price of $1.14. 

This divestment gave me a very decent return in terms of both dividend and capital appreciation for the past couple of years I had them. Other than the dividends I have been getting over these years, I have also participated in their rights last year which brings down my average price further.


At $1.14, and assuming 1.78 cents/quarter annualized for the full year, it represents a dividend yield of 6.2% currently, which I think is a bit heavy (expensive) from a valuation perspective. Still, in a yield hungry world, the yield may continue to compress further, but I think as investors our role is to always assess if the risk of valuation is running ahead than fundamentals.

Operationally, their AUD is performing better so if AUD appreciates this year, we should be looking at higher yield than what it was in 2018.

Do also note that this is one of FLT’s running peak post rights adjustments which they did last year. 

If we were to adjust this to pre-rights adjustment, the back then peak of $1.19 would have translated into $1.14 of today [(1,520,617,000 x $1.14) + (345,800,000 x $0.987) + (152,200,000 x $0.967) divided by 2,018,617,000]. 

I believe this is the level where the management gets an easier job looking for yield accretive acquisitions.

Having a pile of cash from this divestment, I needed to find a place to park these funds with a similar profile yields and it is not easy to find them in today’s rising bullish environment. 

My criteria is straightforward. 

I needed to find a 6% yielder that the company can pay out of their free cash flow, some levels of cashflow predictability and a low semi-variance profile that can ride against the market tide. 

The focus doesn’t have to be long term because they are just funds that I can park when the general valuations are getting higher and these will be rotated/rebalanced once the market shows some vulnerability. 

The 6% yield is my criteria for having to wait in the game and be in the market.

Vicom would have been a perfect example in this case and I would have put more stake in Vicom if not because I have already plenty of it in my portfolio, so I tend to digress to diversify a little bit further. 

Some of the corporate bonds such as the Astrea Bond would have been a solid alternative, but their yield to maturity have dropped significantly since they initially launched. 

The Singapore savings bond at the moment is a bit too conservative for my portfolio and I would consider them to be a drag if timing is not done correctly to rebalance them. 

I'll continue to keep a lookout on any opportunities and welcome any views on suggestion ideas.

Thanks for reading.

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23 comments:

  1. Hi B,

    Considering First Reit? :p

    WK

    ReplyDelete
    Replies
    1. Hi WK

      First Reit's yield is attractive and also their long term potential but with the recent cloud of their parents group, I'm still a bit wary things might go south. Still, I think putting in some amount should be okay I guess.

      Delete
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  3. Replies
    1. Hi Leopard

      Singtel is in my watchlist but given their recent outflow due to the rights and some challenges I might want to get it closer to $2.80ish, or at least nearer to their next interim dividend in Aug. It's a bit too early now to enter in my opinion.

      Delete
  4. What I like is that this is based on freehold property assets, unlike other industrial REITS. Hence to me it is a good long term hold, despite higher valuations. This I believe is justified.
    Anon Andy

    ReplyDelete
    Replies
    1. Hi Andy

      Thanks for your views.

      I agree their assets are good quality , young and have a lot of potential room to grow. Still, from valuations perspective I believe there is lesser margin of safety for someone who's buying at this point.

      Delete
  5. wow, you are fast and so disciplined. I can't bear to sell my FLT off as it has been giving good dividends and (unrealized) capital gains.

    ReplyDelete
    Replies
    1. Hi MIM

      Congrats, it must have been a good stellar returns for you too.

      I agree with you. If your objective is long term, there's no harm just keep collecting dividends from this company.

      Delete
  6. That's a good idea to lock in gains for FLT. Maybe i should do the same. Is VICOM still good? Risen quite a bit since the start of the year as well.

    ReplyDelete
    Replies
    1. Hi Happy Reit Investor

      Vicom still looks good from valuations perspective though in this week they have risen a lot higher now.

      Delete
  7. Nice catch, breed and release on this one. Total return looks very good from the trip.

    ReplyDelete
    Replies
    1. Hi Cory

      Many thanks for your kind comment and it has been a pleasant ride. Im sure I will be back for FLT at some point, hopefully sooner rather than later.

      Delete
  8. You are really a very good and disciplined trader. Thanks for sharing your experience with us.

    ReplyDelete
    Replies
    1. Hi MMF

      Thank you and appreciate your kind comment.

      Delete
  9. Replies
    1. Hi Edwin

      Haha I have enough of Starhill at the moment.

      Otherwise, I might get overdosed.

      Delete
  10. Good one Brian !

    ReplyDelete
  11. What do you think of Keppel infrastructure trust in the short term?

    ReplyDelete
    Replies
    1. Hi Yu Yuan

      KIT has a good defensive profile as well which I like but the Basslink issues keep having troubles. Though, I think it is a good investment below 50 cents in my opinion.

      Delete
  12. i have whacked this stock quite heavily during it's IPO.

    The other is Keppel DC REITs even with greater force at it's IPO..

    Alas, I had sold Keppel DC Reits too early because of fear of losing the "quite large profit on paper "

    i am also trying to sell now FLIT now these few days.

    i am a bit greedy this time.

    i wanted to sell at 1.19.

    i think it is possible if market holds this 1 or 2 months.

    If market crashes, buy some more lol!

    Ha! Ha!

    YMMV.

    ReplyDelete
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