Frasers Logistics & Industrial Trust - DBS Research 2016-11-03: Positioned to grow

Frasers Logistics & Industrial Trust - DBS Vickers 2016-11-03: Positioned to grow FRASERS LOGISTICS & IND TRUST BUOU.SI

Frasers Logistics & Industrial Trust - Positioned to grow

  • Maiden distribution exceeds forecasts by 2.8%.
  • Low gearing of c.28% as of Sept’16 offers opportunity to acquire properties.
  • Attractive valuations; BUY with S$1.10 TP. 



Maintain BUY, TP S$1.10. 

  • We believe that Frasers Logistics & Industrial Trust (FLT) offers good returns with a prospective yield of close to 7.0% which is attractive in the current low-yield environment. 
  • With an under-geared balance sheet, FLT is poised to grow through acquisitions from a visible pipeline of development and completed properties from their sponsor.
  • Maintain BUY and TP at S$1.10. 
  • In addition, upside to earnings will come potentially from the rollover of forex hedges (currently A$1 to S$1) to current spot rates which are 6% higher.


Maiden distribution exceeds forecasts. 

  • FLT’s maiden distribution (DPU) of 1.84 Scts exceeds IPO forecasts by close to 2.8%. This was mainly due to lower-than-projected interest costs at 2.8% vs 3.4% (forecasted during IPO). 
  • Revenue and net property income of A$43.1m and A$32.7m were marginally ahead of IPO forecasts at +0.8% and 0.02% respectively. 
  • Portfolio occupancy increased marginally to 99.2%. The forward outlook remains stable given limited expiries over the coming year.


Visible ROFR pipeline. 

  • The Sponsor has granted FLT a right of first refusal (ROFR) over any of the completed income-producing industrial properties it intends to divest. This currently comprises 11 properties which can be acquired in the medium term.

Valuation

  • BUY maintained, TP S$1.10. Our TP is based on DCF and we have not assumed any further acquisitions. Our TP offers 15% upside to current price.

Key Risks to Our View

  • Currency risk. As the manager pays its distributions in SGD but earns in AUD, the REIT is exposed to currency fluctuations. The manager attempts to red




Derek TAN DBS Vickers | Melvin SONG CFA DBS Vickers | http://www.dbsvickers.com/ 2016-11-03
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 1.100 Same 1.100




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