Actually, this stock has been on my watchlist for ages. But I decided to postpone it as I was busy at work and also busy with promoting the Dividend Scorecard as well as my sharing sessions.
Nevertheless, after my in-depth analysis, I made the purchase of Fraser Centrepoint Limited.
The reason of my in-action previously was that I am unable to find the answer to this question -
“Why choose Fraser Centrepoint Ltd over the other listed firms which are in the same industry?”
The 2nd question I had on my mind is that -
“Why not choose a REIT if you want a high dividend yield?”
I found the answer pretty quickly to the 2nd question:
In my opinion, REITs is mainly purchased for the dividend yield. But for a REIT to grow, it may need to do a rights issue, which may dilute my shares in future. This is something I am not keen on. Furthermore, some REITs tend to become a dumping ground for its Sponsors. Thus, how can I be assured of my returns in future?
Some of the bloggers had also stated REITs are very dependable on how the REIT managers perform. But this can only be access via past REIT performance, which I know nuts about.
At the end of the day, I am not an expert on REIT Investing and I am still learning.
|Summary of my findings and Enhanced Triple S Scorecard with Dividend Scorecard Portion|
(Just to clarify - Those cells highlighted in yellow are the ones that perform the best among its peers, while those cells in green are the ones that perform the worse.)
1. CapitaLand Ltd
CapitaLand Ltd is the most established firm against the competitors listed in the table. Thus, it is the most expensive and has the highest market cap.
I will ignore this stock as I do not believe that there is much value in this stock.
The X factor I am looking for is a stock that intend to become "the next CapitaLand Ltd" and not CapitaLand itself.
2. Fraser Centrepoint Ltd
The stock seem to be very over leveraged and has a negative Price to Free Cash Flow Ratio.
However, I believe that it is overleveraged because it is only listed for a short period (Oct 2014) and the company intends to grow its portfolio. Note that this period is of low interest rate.
Similarly, as the stock intends to grow its portfolio, it makes negative free cash flow from 2011 to 2014. However, in 2015, it managed to turnaround and has started to make positive free cash flow.
The stock also performed the best among its peers, by having the lowest figure, for the last 12 months trailing price to sales ratio and the last 12 months price to earning ratio.
It did fairly well in paying dividend for the last 2 years (2014 & 2015) and getting a reasonable figure for Dividend Yield to PB (better than all of the peers, except OUE Ltd).
In addition, this stock is a sponsor to 4 REITs. If there is really a need, the company will have a better chance to recycle its assets by selling them to these REITs.
Finally, it is also fairly close to its 52 weeks low share price. Do note that $1.470 seems to be its all time low share price as well.
This stock continued to stay on the watchlist.
3. UIC Ltd
I remembered someone had told me not to buy UIC Ltd due to its links with UOB (It's parent company is UOL). They stated that this stock does not treat its minority shareholders well. This is emphasized in its dividend yield for the last 2 years.
Without analyzing the other figures, I decided to ignore this stock.
4. OUE Ltd
This stock seems to be performing relatively well. It has about 20% of margin of safety when you compared its NAV against its share price.
Its dividend yield for the last 2 years has also been relatively high (as compared to its peers) and scored the best for Dividend Yield to PB ratio.
Other than it being quite highly leveraged, it also scores well in other aspects.
This stock is added to my watchlist.
5. Far East Orchard Ltd
This stock actually performed quite well in terms of balance sheet strength. It has a 14% margin of safety when you compared its NAV against its stock price. Furthermore, its current asset are rather liquid and its debt to equity is only at around 16%.
However, the stock fares poorly in terms of declaring dividend for the last 2 years and the stock is not a direct sponsor towards the REIT that it seems to have links to.
Thus, I decided to ignore this stock.
So why was Fraser Centrepoint Ltd chosen in the end?
Fraser Centrepoint Ltd was chosen (as compared to OUE Ltd) is because;
- I believe, for Blue Chips, Price to Earning and Dividend Yield plays a larger part in determining future share price. Thus, since Fraser Centrepoint Ltd has the lowest Price to Earning Ratio as well as a decent dividend yield last year, it is chosen over OUE Ltd;
- Sponsor of 4 REITs as compared to Sponsor of 2 REITs;
- Current Price is very close to 52 weeks low and also historically low;
- In terms of ultimate shareholder, I prefer Thai Beverage over Lippo Mall.
In conclusion, I believe Fraser Centrepoint Ltd has a higher chance to grow to become "the next CapitaLand Ltd" over the other 3 listed firm.
Current Price: $1.485 as of 17 Oct 2016.
For those who intend to try the Enhanced Triple S Scorecard first before attending the sharing session, you can contact me directly as well