My first mistakes in this investment journey

I missed my chance to buy FLT REITs at a discounted price of $0.967 (Trading at $1.03) per share through the preferential offering as shown in the blue paper above. (Just kill me lol) I previously bought into Frasers Logistic and Industrial Trust because I believed it might give me the chance to participate in the accreditive offering. However, I did not know how this will come about even as I read how other bloggers/ investors had the offer on forums. The strongest memory I have was how one investor said he subscribed through the use of ATM but needed to know how much you are entitled or allocated to buy.

Today, I just discovered how. Much for my own loss.

In fact, I opened my letter box late (usually my mum does it and she didn't open it for last week). As such, I am late by 2 days when I could have accumulated more units at a much more attractive price, bringing down my cost per unit.

Anyway, no use crying over spilled milk.

The first signs of this came when I received the yellow paper about "Distribution Reinvestment Plan (DRP)" for FCOT. This was before I received the FLT's preferential offering which I deem as more attractive. I also similarly opened the letter late and as a result I could only receive my dividends in cash back to my bank account.

Learning points:
- A DRP might be a good tool to use to accumulate more units by receiving dividends in the form of units instead of cash. Not all REITs offer this.

- This is my first encounter on a Rights/preferential offering letter and I had no idea how most of these worked. Now I do.
- I will need my own letter box key from now on and I will check for my own letters. This is a necessary change since I have never checked the family letterbox.

Till Next Time,
K.C.

Frasers Logistic and Industrial Trust (FLT): my second REIT

I must say that I am optimistic about the sponsors of FCOT and FLT. FLT is currently a REIT predominantly focused on Australia (61 industrial real estate assets) and there is considerable concentration risk in this aspect.

Recent developments in this REIT is going to see a few changes going forward (A meeting will be held on 8 May to decide if the following goes through):

1. Proposed acquisition of 21 properties in Germany and Netherlands

2. Proposed issue of 525,000,000 new units under equity funds raising

3. Proposed issue and placement of new units to FPL & TCC group investments (private placement)

For the full circular, please read it in its entirety: https://flt.frasersproperty.com/newsroom/20180423_075002_BUOU_NA4AUENJ0NRZLRGW.3.pdf

So who are the sponsors and what are they doing with FLT?

The sponsor of FLT is Frasers Property Limited (formerly known as Frasers Centrepoint Limited) (“FPL” or the “Sponsor”), a multi-national company that owns, develops and manages a diverse, integrated portfolio of properties. Listed on the Main Board of the SGX-ST and headquartered in Singapore, FPL is organised around five asset classes with assets totalling S$28 billion as at 31 December 2017. FPL’s assets range from residential, retail, commercial and business parks, to industrial and logistics in Singapore, Australia, Europe, China and Southeast Asia. Its well-established hospitality business owns and/or operates serviced apartments and hotels in over 80 cities across Asia, Australia, Europe, the Middle East and Africa. FPL is unified by its commitment to deliver enriching and memorable experiences for customers and stakeholders, leveraging knowledge and capabilities from across markets and property sectors, to deliver value in its multiple asset classes."

FLT's latest circular to unit holders

The 61 Australia assets in FLT are now set to include 21 new properties in Germany and Netherlands. This will also mean its estimated portfolio value is expected to increase from A$1.9billion to A$2.9billion. By no means is this a small amount of money so accordingly we are seeing FPL raising it though a combination of equity fund raising and private placement of units.

The one good outcome of this acquisition is that FLT's concentration risk will now be diversified into approximately 67% Australia, 25% Germany and 8% Netherlands.
 

Germany and Netherlands present a good market for trade oriented economy and the resulting acquisition will also be made up of a more diversified mix of tenants. Likewise, the concentration risk due to geographical location is also diluted. The assets are also up to 71% freehold.

The sponsors have also negotiated a ROFR on many of the assets:

Right of first refusal (ROFR or RFR) is a contractual right that gives its holder the option to enter a business transaction with the owner of something, according to specified terms, before the owner is entitled to enter into that transaction with a third party.

Lastly, the REIT is expected to be DPU accretive.

These changes are subjected to approval from unitholders who should most likely approve of the acquisition as there doesn't seem to be a bad thing where this REIT is headed. If it goes through, the acquisition could be done by late July 2018. Gearing, however will be increased from 29.3% to 35.4%. 

Appendix C of the circular also includes an interesting independent market research done on the following if you are interested:

"INDUSTRIAL AND LOGISTICS MARKET OVERVIEW: GERMANY AND THE NETHERLANDS"

Vested at $1.06 on 25th April 2018.

Until Next Time, 
K.C.

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Related topics:
1. About K.C. What is my story?
2. My 3Cs to money/investing
3. Why you need to set aside money for savings first

My REITS plan for the year and my first REIT: Frasers Commercial Trust (FCOT)

Started my first dabble into REITS today, the fourth day of Chinese New Year.

My plan for this year is to consistently buy into REITS:
(one REIT per every 2 months worth at least around $1,500- $3,000 per buy to keep cost slightly lower)

Therefore, by the end of this year, I would/should have achieved the purchase of 6 REITS hopefully within the amount of $12,000-$15,000.

My constraints and my decisions:

1. Cost vs Consistency/Discipline:
My first year of investment would likely see me incur a higher cost per transaction. This is largely due to the lack of capital (which shall not be my excuse anymore). I will therefore come up with a plan that emphasize on Discipline and Consistency for this first year. For a workaround, I have decided that for each REIT I purchase, I would want to keep my costs incurred to within 3% or below per transaction. By identifying REITS that fit into my investment appetite mainly growth and dividends REITS that are manageable for my capital outlay, I should achieve an overall Dividend Yield of 2-4% for this first year.

My major weakness in life has been on the issue of discipline, therefore I have decided to set aside $1,500 - $1,800 a month to buy a REIT. Dollar-cost-averaging, since my first year is just to get the discipline to do my homework and invest consistently.

2. Imperfect knowledge of the Market and the REITS I'm buying into:
I shall refrain from buying in bulk also because of my imperfect knowledge of the market. It would be good for me to practice my fundamental analysis and see how they turn out in a year, whether I was right/wrong. I am still new and I cannot possibly know everything but I have to make smart guesses and calculated risks along the way.

It would also allow me to buy into different sectors of REITS and learn more about how they function as a whole to market movements and sentiments.

3. Unfamiliarity with the tools I'm using at the moment:
I'm currently using some Dividends trackers made by others, a few websites that source REITS news and I'm also new to how DBS vickers/CDP works. Time will tell which of these tools I'm using are good/more reliable than others or not. I would likely take time to explore the functions and various information available to me.

As of the time I am buying into the REIT, I have not studied every single piece of information put to me by the software, websites as the amount of information is huge. This will likely need some digestion on my side.



My first REIT: Frasers Commercial Trust (FCOT)
As of the time I studied the REITs, I had quite a few REITs I had identified based on my fundamental analysis.

My criterias were:
1. Promising Growth
2. Consistent Dividends (track record)
3. Fundamentals of the company (assets short-term to long-term)

I had eliminated a few like Lippo Malls Trust which was favored alot by retail investors. (I might re-look again at this REIT)

Indonesia is an emerging market and this REIT has given consistently high dividend yield. On the surface it looks like a good REIT. However, even as their assets are mainly retail malls, their net asset value has not increased much over the years as the underlying property and assets is stagnated/depreciating due to the Rupiah/ market condition.

Comparing apple for apple, CapitaR China Trust (I will certainly be looking at this again) has that same growth potential but the RMB is in a much stronger shape backed by the purchasing power of the chinese and situated in much more populated areas with much more solid big brand tenants like Uniqulo, Zara, watsons and Aeon.

Anyway, back to Frasers Commercial Trust:

 

Source: Frasers Commercial Trust Website

For me, this REIT has been strong fundamentally although the dividend Yield is not the best it has been delivering consistency. Its Nett assets have also been increasing in value over the years. 50% of the REIT comprises of Australia properties.

In Singapore, the China Square tenant revenue has taken a hit due to upgrading from 2016 projected to end in mid 2019 and the loss of HP as a major tenant caused a slightly lower performance in this quarter. But other than this, the other tenanted properties are doing well with high tenancy rate.

For Australia side, I am honestly not too familiar with the Aussie market but it has seen a slight dip due to the weakening Aussie dollar but is also not doing too bad. More homework and due diligence would be needed before I make an opinion of the Australia side of things but from the fundamentals it is strong enough to convince me of its mid to long term growth. FCOT is also in a joint venture currently to purchase Farnborough Business Park which has a long weighted average lease expiry (98.1% leased) in London, UK.

Update:
FCOT in numbers

My Key Indicators

	FY2014	FY2015	FY2016	FY2017	LTM Ending
	30-Sep-14	30-Sep-15	30-Sep-16	30-Sep-17	31-Dec-17

Total Revenue	118.838	142.187	156.497	156.551	152.193
Gross Profit	90.554	101.868	115.614	113.843	109.562
GP/TR%	76.1995321	71.6436805	73.8761765	72.7194333	71.9888563

Dividend Yield (based on last stock price)

6.83098592

Net PP&E

1,824.94

1,954.88

1,989.37

2,070.92

2,054.60

Gross Margin	76.2	71.644	73.876	72.719	71.989

Operations

82.01

88.574

101.786

96.824

86.155

Investing

-3.454

-197.286

-3.32

-5.439

-26.506

Financing

-73.578

124.185

-89.397

-88.356

-85.432

Current Ratio	2.177	2.011	0.363	0.39	0.304

GEARING					34.80

Total Debt/Equity	63.522	60.847	61.012	58.234	58.398

EBITDA/Interest Expense	3.854	4.029	4.149	4.112	3.936

EBITDA

0.034

13.541

15.177

-1.909

-6.121

As of 19/2/2018:
1,000 shares bought at $1.440

Till next time,
K.C.

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Disclaimer: The above information are for personal discussion purposes only and do not constitute financial advice. Do conduct your due diligence before making any financial decision. "30 Year Old Investor" shall not be liable for any loss or damage of any kind arising from the result of your reliance of the information contained on this site.