Good generalities

One can read all sorts of positives and negatives in home-construction statistics in the current Australian setting, and differing published opinions can often occur on the same day. I read one FRI-positive point today in the generally negative article at https://au.finance.yahoo.com/news/home-building-trend-still-weak-061015667.html, and that is, “In the 1980s, for every one apartment, flat, or townhouse built, there were three free-standing homes constructed. But by the past year, there were only 1.3 houses for every home in a multi-unit block.”

Simply put, the mega-trend is that apartments, flats and townhouses are going to be an increasingly large percentage of homes built in future, and as far as Perth is concerned, FRI is in the front-running pack of providers of new homes.

A second generalisation is that investors can usually back a good management team with impunity, because the companies under their stewardship perform well, and if a business sector is in decline, good management can switch to another sector. FRI started as a shipping company, and smoothly morphed into an apartment construction company that outsources the Bob-The-Builder stuff. It is not a company that would stay in the bath contemplating its navel if somebody pulled the plug and ran off with it.

A third generalisation is that it's usually good to invest in a company if directors buy shares in it. FRI directors, especially John Chan, often pick up reasonable parcels of FRI shares. Historical studies abroad indicate that directors typically buy shares at about 20% discount to where the SP settles a year later. A variation on this theme is that if a company buys back its own shares, it usually pans out well for the residual shareholders.

Apart from FRI being in a cyclical sector, and the current iron-ore-bad mantra applied to Perth, there is much to like about the stock. The historical financial metrics speak for themselves, and the speak with the authority of many years of sterling performance.