Current Price on 25th Oct 2011 = $0.755
- Current Yield = 7.62%
- Price-to-book Ratio = 0.565
- Assets per unit = $2.715
- Debt per unit = $1.378
- Gearing = 50.8% (considering CPPU as liabilities)
- Secured NAV = $0.193
FCOT has a very good news which is the refinancing of its AUD loan. What was significant to me is the unencumbering of one of its assets which gives a secured NAV of $0.193. It is 25% of its current trading price which I thought was a good start.
One analysis which I have been reading is the cash call aka rights issue to reduce its gearing. I am expecting none of its CPPU to be converted to units due to its high price. Therefore, I think it is very likely that there will be a rights issue to clear off its CPPU debt.
Rights issue is always seen as negative which I don't really understand because most rights issue is due to new property purchases which enhances the REIT's portfolio. Most of the time, I am in favour of rights issue as it gives me opportunity to invest more in it and earn more dividends. But for this rights issue for FCOT which I anticipate, it may not be a good idea. Another alternative is to re-issue CPPU at a different terms to solve this problem. It might be a better idea.
With a yield of close to 8% and price-to-book ratio of 0.565 (which is very low), I am looking forward to more good news which I am expecting (stated earlier in the analysis).