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


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.

4QFY9/18 results highlights

  • 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.

High portfolio occupancy, minimal lease expiries in FY19-20

  • 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.

New accretive acquisition in Netherlands

  • 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.

Capital management

  • 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.

Maintain ADD

  • 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