Frasers Logistics & Industrial Trust - CIMB Research 2017-07-31: 3QFY17 Results In Line

FRASERS LOGISTICS & IND TRUST BUOU.SI

Frasers Logistics & Industrial Trust - 3QFY17 Results In Line

FLT's 3QFY17 DPU of 1.75 Scts (6.7% above IPO forecast) was in line with our expectations at 25% of our full-year forecast. 9MFY17 was at 76%.
We note that FLT will be undertaking its first AEI since listing. The estimated return of cost for the AEI at Stramit is 8.95%.

Maintain Add on FLT. There could be slight upside to our DDM-based target price as we have not factored in the acquisition of the seven properties.

FLT produced an in-line quarter, with the positive variance (vs. IPO forecast) continuing to stem from lower interest savings of 2.8% p.a. vs. forecast of 3.4% p.a. Also, the Martin Brower acquisition required lower-than-expected debt of A$20m.
3QFY17 cash NPI was in line with our forecast at 25% of our full-year estimate.
Note that our numbers have not incorporated the effects of the private placement (75m new units were issued on 6 Jul 2017 for S$1.01/unit) as well as the proposed acquisition of the seven properties in Australia for A$169.3m (6.4% initial NPI yield) from its sponsor. On 26 Jul 2017, unitholders at the EGM approved the acquisitions.
In connection with the private placement, the manager declared an advanced distribution of 1.84 Scts for units in issue on 5 Jul 2017 payable on 29 Sep 2017.

During the quarter, FLT renewed leases totalling 26.3k sq m across two properties at 18-20 Butler Boulevard, Adelaide, and 57-71 Platinum St, Queensland (Stramit property). The Stramit property renewal also provided an asset enhancement opportunity through a 1.2k sq m expansion as well as the installation of a 773 sq m awning. The estimated return of cost is 8.95%.
Portfolio occupancy held firm at 99.3% as at 30 Jun 2017, with a WALE of 6.7 years and minimal lease expiries of 0.2% (by gross rental income) for the remaining FY17F.
From listing date to 30 Jun 2017, FLT executed 140.3k sq m of new lease/lease renewals, representing 11.4% of total portfolio GFA (gross floor area), with a tenant retention rate of 94%.

As at 30 Jun 2017, gearing was 29.3%. 79% of borrowings have been hedged into a fixed rate. Weighted average cost of borrowings is 2.8% p.a., with no debt expiry in FY17 and FY18.

Pending the sell-side briefing this morning at 10am, we maintain Add on FLT with an unchanged DDM-based TP. We are also hosting a non-deal roadshow for FLT in Kuala Lumpur in these two days.
There could be slight upside to our DPU estimates and target price as we have not factored in the acquisition of the seven properties.

YEO Zhi Bin CIMB Research | LOCK Mun Yee CIMB Research | http://research.itradecimb.com/ 2017-07-31

CIMB Research SGX Stock Analyst Report ADD Maintain ADD 1.100 Same 1.100