Most real estate investment trusts (REITs) were having a field day with the not-so-unexpected cut of 50 basis points of interest rates. One REIT stood out as seen not benefiting from the rate cut, which is Frasers Centrepoint Trust (FCT).
Screenshot of FCT properties from presentation slides of FCT’s business updates for the Third Quarter ended 30 June 2024.
Looking at its price movement, it had seen a huge rise during the month of August, where the United States Federal Reserve (or Fed) had dropped a big hint on interest rate cuts. It reached a peak of SGD 2.41 just around a week before the Fed’s announcement, but after which, it went down to SGD 2.27 when the market week ended on 20 September.
There were people whom I know asking about what was happening, and I just shrugged (read here about why asking “what is happening” does not help much in the situation). From their third quarter financial highlights, the gearing level stood at 39.1% and their average cost of debt was 4.1%1. This meant that the rate cut should benefit FCT given the not-so-high-but-high-enough gearing ratio and the cost of loan they were getting, so theoretically there are some justified push-up factors for its price instead of going opposite.
With the last known book value of SGD 2.26 as of 31 March 20242, at SGD 2.27 it represented a good bargain, since FCT was one of the stronger retail REITs known, and with 100% exposure in Singapore properties, thus could command a higher premium. This is a good example of a fundamentally sound counter that was somehow being dragged down for reasons, obvious or not, and for us this show of price weakness meant a good chance to average up our FCT holdings.
Disclosure
The Bedokian is vested in FCT.
1 – Fraser Centrepoint Trust. Business updates for the Third Quarter ended 30 June 2024. 24 Jul 2024. https://fct.frasersproperty.com/newsroom/20240724_193109_J69U_7OBO7A3PF3O39XSV.1.pdf (accessed 22 Sep 2024)
2 – Fraser Centrepoint Trust. Results Presentation for the First Half Financial Year 2024 ended 31 March 2024. 25 Apr 2024. https://fct.frasersproperty.com/newsroom/20240425_075534_J69U_VG71VYH4JFEHK0J8.3.pdf (accessed 22 Sep 2024)
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