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QuestionsCategory: Stock ScreeningFrasers Centrepoint Ltd (FCL)
Michael Lim asked 5 years ago

Hi Victor/Rusmin,
I have taking a quick look at FCL. Like to seek your opinion on some finding on some observation I have made about the company.
Management 
Frasers Centrepoint announced a change of guard in its senior management team. Lim Ee Seng, who has been the company’s CEO since 2004, would be stepping down at the end of September this year. He would then be moving on to become a senior adviser to the TCC Group.
Panote Sirivadhanabhakdi, has been appointed as the CEO of Frasers Centrepoint. It is worth noting that Frasers Centrepoint is majority-owned by the Sirivadhanabhakdi family; the TCC Group is their investment vehicle.
Are able to assess any potential impact now that one of their own family is heading FCL? Could it be a sign that the family is going to put more emphasis on the company going forward? Any potential risk that we as investor have to take note, i.e  IPT (Interested Person Transaction) that will only benefits the major shareholders.
Financial And Valuation
net debt to equity ratio: 87%
Percentage of Fixed Rate Debt: 73%
Net Interest Cover: 9x
Dividend Per Share: 8.6 cents
Dividend Yield: 5.7%
Payout Ratio: 50%
Price to Book Ratio: 0.66
In light of Bexit, the Reits has run up significantly. The current dividend yield of FCL is on par with the the Reits that its own. (FCL,FCOT etc).
It is also trading at about 35% discount to its NAV. I do know that all property counters in SGX are also trading at significant discount to its NAV. however, none are paying dividends at a level similar to FCL
Given that FCL price has come down from its near $2 high, i am inclined to think that some value has emerged. 
Your Feedback are most welcomed :)

1 Answers
Victor Chng answered 5 years ago

Hi Michael,

Management

 
Based on the information you had given, I think is too early to gauge the management. I think you have to give the new management sometime before we can start accessing them.

Financial and Valuation 
 

  1. FCL is a property company hence it is better to use Debt to Assets as compared to debt to equity.
  2. Regarding valuation, you may want to consider plotting the NAV against their share price chart and see whether what is their average gap range. Once you determine the average gap range, the best time to enter such companies is when the range are bigger than their average gap

 

Michael Lim replied 5 years ago

Hi Victor,

Thank you very much for answering and pointing me in the right direction.

Debt to Asset Ratio was not mentioned in the financial ratio, so i do not know that it can be used. Since Property company is asset heavy, using asset as a denominator would make more sense? Thanks for the tips!

Can i check with you that for Debt to Assets Ratio, the formula should be:
= Total Debt / Total Assets (Current asset + non-current Assets)

Victor Chng replied 5 years ago

Yup that the formula is correct