Inside The Bedokian’s Portfolio is an intermittent series where I will reveal what we have in our investment portfolio, one company/bond/REIT/ETF at a time. In each post I will briefly give an overview of the counter, why I had selected it and what possibly lies ahead in its future.
For this issue, I will discuss about the locally listed real estate investment trust (REIT), Frasers Logistics & Commercial Trust (FLCT, ticker: BUOU).
Overview
FLCT held a total of 105 properties across five countries (Australia – 50.9%, Germany – 24.1%, Singapore – 9.8%, United Kingdom – 9.6% and The Netherlands – 5.6%) and spanning logistics and industrial complexes (68.3%), offices and business parks (22.5%), and central business district commercial properties (9.2%)1.
Why FLCT?
FLCT, or rather one of its predecessors, Frasers Commercial Trust (FCOT), is the longest holding in the Bedokian’s portfolio, starting in 2009, way before my “great awakening” in 2013. I initially bought FCOT for trading, but as time goes by it survived its position in the portfolio, with additional purchases, to the present day. The reason for its retention was FCOT’s commercial play and I felt it suited an inclusion.
Before the merger with Frasers Logistics & Industrial Trust (FLIT), FCOT had one of the lowest gearing amongst the REITs at 28.6%, a respectable dividend yield of 5.75% and a reasonable price-to-book (P/B) value of 1.04 (all figures were as at Oct – Nov 2019). In early 2020, FCOT merged with FLIT to form FLCT (I had written about this here and here).
After the merger, and besides rounding up the numbers to make it a multiple of 100 by buying a few 10s of FLIT shares, there is no further additions to the counter. As of the latest financial information, FLCT is still one of the lowest geared REIT at 27.9%1, with a current dividend yield of around 6.145% with a P/B ratio of 0.952. This presented a good opportunity to average up the REIT, albeit the current rising interest rate environment.
What’s Next?
The prevailing macroeconomic factors are tilting in a positive favour for logistics, with the resumption of supply chain flows expected to improve after the recovery from COVID-19 disruption (especially China, dubbed as “the factory of the world”), and the continued uptrend of e-commerce. The commercial side of things, however, is still dampened by the trend of working from home, though we are seeing an increasing inclination of workers returning to the offices. Rising interest rates would also hamper the yield, with a projected SGD 0.06 drop for every 50 basis points of rate increase1. Still, FLCT’s low gearing and high interest cover ratio would mitigate somewhat the risks highlighted above and proved to be an attractive REIT for me to add on.
Disclosure
Bought FLCT at:
SGD 0.165 at Aug and Sep 2009 (as FCOT)
SGD 1.51 at Apr 2015 (as FCOT)
SGD 1.255 at May 2016 (as FCOT)
SGD 1.24 at June 2016 (as FCOT)
SGD 1.26 at Mar 2017 (as FCOT)
SGD 1.47 at Mar 2019 (as FCOT)
SGD 0.975 & 0.98 at Apr 2020 (as FLIT)
1 – 1QFY23 Business Update. Frasers Logistics & Commercial Trust. 1 Feb 2023. https://flct.frasersproperty.com/newsroom/20230201_202824_BUOU_R0QWVEFBGWRNFX7C.1.pdf (accessed 19 Feb 2023)
2 – Reitdata.com (accessed 19 Feb 2023)
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