Frasers Logistics & Industrial Trust - OCBC Investment 2017-06-29: Private Placement To Fund Inorganic Growth

Frasers Logistics & Industrial Trust - OCBC Investment 2017-06-29: Private Placement To Fund Inorganic Growth FRASERS LOGISTICS & IND TRUST BUOU.SI

Frasers Logistics & Industrial Trust - Private Placement To Fund Inorganic Growth

  • Private placement 4.6x subscribed.
  • FY17F gearing ratio of 32.1%.
  • Raise Fair Value and maintain BUY.

Private placement to raise net proceeds of S$77.2m… 

  • Frasers Logistics & Industrial Trust (FLT) announced yesterday that it has closed its private placement exercise whereby it will issue 78m new units at an issue price of S$1.01 per new unit. This represents a discount of 2.9% against its last closing price of S$1.04 prior to the announcement and translates into gross proceeds of S$78.8m and net proceeds of S$77.2m
  • Besides being 4.6 times subscribed, the final issue price also comes in at the top end of the indicative range of S$0.985 – S$1.01, which we believe reflects the strong sentiment in the market and confidence in FLT’s prospects.

…to partially fund its proposed acquisitions 

  • This private placement does not come as a surprise to us, as FLT had previously indicated that it may fund its proposed acquisition of a portfolio of seven industrial properties in Australia from its sponsor for an estimated total cost of ~A$179.6m using a combination of debt and equity. The net proceeds raised will be used to partially finance this acquisition. 
  • As a recap, the initial NPI yield of the proposed portfolio acquisition is estimated to be 6.4% (6.8% for the completed properties and 6.1% for the development properties). 
  • The properties are fully occupied (including pre-committed leases for the development properties), and have a long WALE of 9.6 years, which is higher than FLT’s existing portfolio WALE of 6.7 years (overall WALE will increase by 0.2 years to 6.9 years as a result).
  • There are also built-in annual rent escalations of 3.1% embedded in the portfolio leases.

Maintain BUY 

  • Given a clearer capital structure for the funding of FLT’s proposed acquisitions, we now incorporate these developments in our model.
  • Our FY17/FY18 NPI and DPU forecasts are raised by 1.2%/7.7% and 0.0%/1.2%, respectively.
  • Gearing ratio is projected to be 32.1%, as at end-FY17F, versus 28.9%, as at 31 Mar 2017.
  • Maintain BUY on FLT, with a revised fair value estimate of S$1.14 (previously S$1.12). 
  • FLT remains as one of our top picks within the SREITs sector, offering FY17F distribution yield of 6.5%

Wong Teck Ching Andy CFA OCBC Investment | 2017-06-29
OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 1.140 Up 1.120