One tenth of my net worth is in Frasers Logistics and Commercial Trust - one third of their properties are in Europe - and Europe is fucked. I need to see how they will be affected by both inflation and a recession.
Quick overview of FCLT:
- 105 properties: mostly industrial, logistics or business parks. 3 or 4 are office buildings. 2/3rds are freehold.
- Half the property in Australia, 23% in Germany, 20% in the UK.
- 30% leverage
- Like all SGX REITs, they payout all their cashflows as dividends and never pay down debt. So they need to borrow or issue new shares every time they acquire.
Germany and The Netherlands
Energy Crisis
Inflation
The UK
Australia
I think Australian industry will have a recession - the first in 27 years, but not an energy crisis. Since so little is manufactured there anyway, industry won't be affected. Not worried about the recession, since its a normal part of business.
Ceva Logistics (2% of Total Gross Revenue) and WeWork (0.7%) look weak. The rest I can't tell.
FCLT's "logistics and industrial leases generally have fixed annual increments averaging 3.1%", while "commercial leases in Australia generally have fixed increments averaging 3.3%."
Conclusion
I estimate:
- 36% of their German/Dutch revenue is at risk from the energy crisis, or 8.1% of total gross revenue.
- Add another 2.7% revenue at risk from risky companies (Ceva Logistics and WeWork)
- There may be some more recession casualties. Lets just guess 5%.
Even if *all* 16% of this revenue was lost, the company would survive without raising capital. Dividends would drop by 27%. This is a worst case scenario, its not a realistic one.
The bigger risk for a Singapore investor is that SGD will rise against the AUD, EUR and Pound. Especially for or the latter two, governments will print to help sooth over their energy problems.
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