Frasers Logistics & Industrial Trust - CGS-CIMB Research 2018-11-07: Boosted By Acquisitions And Divestment Gains

FRASERS LOGISTICS & IND TRUST (SGX:BUOU)

Frasers Logistics & Industrial Trust - Boosted By Acquisitions And Divestment Gains

FLT’s 4Q18 DPU of 1.78 Scts and FY9/18 DPU of 7.19 Scts are in line with our expectations.
FLT reported high portfolio occupancy of 99.6% at end-Sep FY18.
Maintain ADD. Our DDM-based Target Price is lowered slightly to S$1.19.

Frasers Logistics & Industrial Trust (FLT)'s 4QFY9/18 DPU of 1.78 Scts was 0.6% higher y-o-y due to inorganic contributions from new acquisitions in Europe and Australia, inbuilt rental escalations as well as a distribution of a A$2m divestment gain, partly offset by an enlarged unit base post a fund raising exercise and a weaker hedge rate of A$1:S$1.0011.

For FY9/18, DPU of 7.19 Scts is 2.6% above previous period (FY9/17) and formed 100% of our FY18 forecast.
FLT revalued its portfolio up by 1.9% y-o-y, translating into a BV of A$0.95/unit.

Portfolio occupancy held relatively steady q-o-q at 99.6% with a WALE of 6.87 years.
Frasers Logistics & Industrial Trust (FLT) renewed/leased 296,593 sq m or 15.3% of its portfolio leaseable areas in FY18, with a retention rate of 84% and average negative rental reversion of 3.2%. Of this, in 4Q, it leased/renewed 16,129 sq m of space in Queensland and Victoria, at a -5.1% average reversion.
FLT has a small 2.5% of its portfolio income due to expire in FY19 and 5.9% in FY20. This should provide stable income visibility for the trust.

Frasers Logistics & Industrial Trust (FLT) acquired another property in Netherlands in Oct 18 for €25.4m or at a NPI yield of 5.4%.
The property is fully leased to Friesland Campina on a 15-year triple net lease contract. This will increase its European portfolio to 22 properties. The purchase is expected to be funded by debt and accretive to bottomline.

Gearing stands at 88.8% at end-Sep 88. All-in debt cost is slightly higher q-o-q to 8.8%, with 88% of its debt cost on fixed rates.
Frasers Logistics & Industrial Trust has A$888m and €88m of debt to be refinanced in FY88.

We tweak our FY88-88 estimates post results and introduce our FY88 projections. However, we lower our DDM-based Target Price to S$8.88 on weaker A$ assumption of S$8: A$8 (vs S$8.88 previously).
Catalysts are positive rental reversions within its Australian portfolio while downside risks are a weak Aussie dollar and rising interest rates.

LOCK Mun Yee CGS-CIMB Research | EING Kar Mei CFA CGS-CIMB Research | https://research.itradecimb.com/ 2018-11-07

SGX Stock Analyst Report ADD MAINTAIN ADD 1.19 DOWN 1.240