Dead, page-12

Can't see all the article as not a BN register - any chance of pasting in the rest of the article here @DJRN ?
I think we need to take a medium term outlook to FRI. Share price aside, what do we know:

a) mining in WA is dead and shot and this will reflect accordingly on the Pellagio/outback properties

b) The flow on effects of less mining money is naturally the property sector in WA has gone back.

Now we do know a few things:

c) Things are rotating from mining to new sectors - what though I am not completely sure of. Technology? Services? I am yet to be convinced of a specialisation in WA that shines out like the mining sector did. but i do know that:

d) the CBD is getting bigger and livelier. It still doesn't feel like a Melbourne but I walk around now and notice a few more 'new' large skyscrapers that have popped out of nowhere. Either that or I am just blind as a bat to buildings that have always been there. I feel like there are more people around after work drinking on the sides, and although I am yet to see the variety and quantity of restaurants, cocktail bars and fancy up market hipsterish places as Melbourne, we definitely have alot more eclectic mix of small bars and things that the gf frequently visits on a friday and saturday night that I hadn't heard of before. Or maybe I"m just more exposed since dating her these last few years?


Based on the above population will always continue to grow, albeit not at the mining days rate of net migration where things were booming. There's no doubt more and more high rises are needed, and based on the urbanisation of Perth per the above point, we're seeing more and more apartments in east perth, some in west perth now, but definitely a fair few popping up around the CBD.

The question now is more of what price to pay for FRI to participate in the above. And weighing up the oversupply from other apartment developers. If things slow, the question still lies ahead on whether FRI will grit through the tougher times as oversupply sees a few developers tone down. When we come out on the other side I think the main opportunities will come from the sites that they are scooping up now. South perth too will be a key one, but that is already in construction/in the works - so the residential inner city band sites will be key - i.e. the great eastern highway one, belmont from memory, and that old egg factory site (malaga was it? forgot). I think this is a good way to go but would also like to see some good inner city sites being positioned for 3-5 years time when things start normalising.

WIth that in mind where do we then see a suitable price? At $0.81 surely this company isn't overvalued, but are we in for a further drop - i'm not sure. I probably need to crunch more 'hypothetical' numbers, but just off a 5 sec, off the back of my brain calculation, if DPS dropped to $0.05 a year, even on $0.81 we're seeing 6.2% dividend yields. Now that's a big drop from a $0.10 a year DPS we've been accustomed to. FRI isn't overly leveraged, and short of things crashing and burning I don't see them crashing to bankruptcy over projects gone wrong. the 50% JV with landowners at least sees us exposed to construction costs liablities and not having to purchase the land.

I've been listening to alot of property podcasts recently as I've wondered if being in shares was the wrong mug game for me for extensive wealth creation, and I couldn't help but think about yields and how they can over-leverage further than shares (you won't get a margin call on property, so long as you can service the repayments). So while on the yield page I can't help but wonder if a $0.05 DPS on 6.2% yield currently is too good to be true.

Assuming that's a 75% payout ratio (conservatively based % based on i think from memory DPS of $0.10 currently is contrasting with about $0.14 EPS) then working backwards a $0.05 DPS is equivalent to about 6.67 cents of EPS.

On 81.5c share price that's a P/E of 12. That's pretty conservative, but going off 12 years to make your investment back - that's still pretty decent. I see money making opportunities vs someone who went out and spent that money on beer and useless toys - in 12 years you'll make back that exact amount of money. Then ther eis the upside from these huge south perth projects, which if they eventually sell out and complete on time and on budget as their smaller projects have gone to plan, will more than blow the EPS past 6.67c guaranteed.

So if property supposedly 'doubles every 10 years' - which I think is mathermatically calculated to be true, but empirically doesn't happen, or at least wont for property at its current price, then a P/E of 10 for Finbar would be equivalently a good deal. With plenty of upside still on future projects and the like.

Not to mention that as population increases, like every mega city before it - apartment living will becoming increasingly popular. Finbar being one of the more well known apartment names also has a first mover /brand power advantage.

Of course it outsources the majority of its work - but I believe that's one part of the reason we took the hit to issue equity to Hansen - after all, they do all the construction work, and having their joint interests in equity is incentive for them to not only do a good job and maintain their business relationship, but any profits FRI makes out of that also partially flows back to them. It's almost like owning the commercial property in your SMSF that your business rents out - you double dip on the expenses side while claiming the revenue back! having and eating your cake at the same time.

It would be great if anyone who has had the time to do a detaile dfinancial analysis on conservative numbers that could potentially be earnt from the project pipeline on FRI (we would need to assume a conservative settlement defualt rate given the current tightening in the market and financing) that would be willing to share? Think someone awhile back posted a screenshot of a pretty decent looking excel analysis - would they be kind enough to share again?