Frasers Logistics & Industrial Trust - OCBC Investment 2017-07-31: In-line Results; Outlook Remains Firm

Frasers Logistics & Industrial Trust - OCBC Investment 2017-07-31: In-line Results; Outlook Remains Firm FRASERS LOGISTICS & IND TRUST BUOU.SI

Frasers Logistics & Industrial Trust - In-line Results; Outlook Remains Firm

  • 3QFY17 DPU above IPO projections.
  • High occupancy of 99.3%.
  • BUY with higher FV.

3QFY17 results within our expectations 

  • Frasers Logistics & Industrial Trust (FLT) reported its 3QFY17 results which met our expectations. 
  • Gross revenue of A$40.2m came in slightly lower by 0.2% than its forecast as disclosed in its IPO Prospectus. 
  • NPI of A$33.8m was 0.1% ahead of FLT’s forecast, while DPU of 1.75 S cents beat by a larger magnitude of 6.7% due largely to lower-than-expected finance costs. 
  • For 9MFY17, FLT’s gross revenue of A$120.8m and DPU of 5.24 S cents formed 73.4% and 75.8% of our FY17 forecasts, respectively.

Outlook still firm 

  • FLT’s portfolio occupancy remained high at 99.3%, with a long WALE of 6.7 years, as at 30 Jun 2017. 
  • Its balance sheet also remains healthy with an aggregate leverage of 29.3%, although we expect this to increase to 32.1% by end-FY17. 
  • Industry outlook remains firm, with Sydney’s Outer West seeing strong demand, while Melbourne’s take-up rates are improving with strong pre-lease activities, although supply levels remain above the long-term average. 
  • We believe there is room for further compression in prime yields in the near-term, especially for assets which are well-located and backed by long WALEs.

Maintain Buy 

  • FLT has obtained unitholders’ approval at its EGM for its proposed acquisition of a portfolio of seven industrial properties in Australia from its sponsor for an estimated total cost of ~A$179.6m. This would progressively complete from Aug this year and we had already baked the expected contribution in our forecasts previously. 
  • Meanwhile, we note that the Reserve Bank of Australia recently provided an upbeat assessment of the economy, citing improvements in labour market conditions, household consumption growth and investments. We believe these trends would benefit the logistics industry, and raise our terminal growth rate assumption for FLT from 1.5% to 2.0%. 
  • Consequently, our fair value is bumped up to S$1.22 (previously S$1.14). Reiterate BUY on FLT, given potential total returns of 16.3%.

Wong Teck Ching Andy CFA OCBC Investment | http://www.ocbcresearch.com/ 2017-07-31
OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 1.22 Up 1.140