Frasers Logistics & Industrial Trust - OCBC Investment 2019-04-30: AUD Weakness Bites

FRASERS LOGISTICS & IND TRUST (SGX:BUOU) | SGinvestors.io FRASERS LOGISTICS & IND TRUST (SGX:BUOU)

Frasers Logistics & Industrial Trust - AUD Weakness Bites




FLT's 2QFY19 results in-line with expectations

  • FRASERS LOGISTICS & IND TRUST (SGX:BUOU)’s 2QFY19 results met our expectations. Gross revenue and adjusted NPI (excluding straight-lining adjustments) surged 36.9% and 43.3% y-o-y to A$59.7m and A$47.9m, respectively, due largely to inorganic growth, but partially offset by divestments.
  • 2QFY19 DPU in AUD terms grew 7.1% y-o-y to 1.82 A cents. However, in SGD terms, DPU fell 2.8% to 1.76 S cents as a result of a lower hedged exchange rate of A$1.00: S$0.9666, versus A$1.00: S$1.0647 in 2QFY18.
  • On a 1HFY19 basis, Frasers Logistics & Industrial Trust’s adjusted NPI jumped 44.9% to A$96.8m, while DPU in SGD terms declined 1.9% to 3.54 S cents due to similar reasons highlighted above. The latter formed 49.5% of our FY19 forecast. In AUD terms, 1HFY19 DPU rose 6.8% to 3.63 A cents.


AEI opportunity to mitigate negative rental reversion from renewal

  • Operationally, Frasers Logistics & Industrial Trust saw negative rental reversions of 5.3% in 2QFY19. However, this was for 24.9k sqm of space, which represents only 1.3% of Frasers Logistics & Industrial Trust’s portfolio GLA.
  • The bulk of the negative rental reversions came from its 468 Boundary Road property in Victoria (-4.9%), but this entails a 10-year lease extension commencing Aug 2021 with an annual rental step-up of 2.5%.
  • Furthermore, there was also a corresponding AEI opportunity from this lease renewal, as Frasers Logistics & Industrial Trust managed to acquire an adjacent freehold site (12.3k sqm) from its sponsor for A$0.8m, which allows an expansion to the existing hardstand area and an upgrade of the existing facilities. The expected ROI of this AEI is ~8%.
  • Frasers Logistics & Industrial Trust’s portfolio remains largely defensive, with a portfolio WALE of 6.6 years and minimal lease expiries in the near-term (1.3% and 5.9% of its gross rental income expiring in 2HFY19 and FY20, respectively).


Had a good run






Andy Wong Teck Ching CFA OCBC Investment Research | https://www.iocbc.com/ 2019-04-30
SGX Stock Analyst Report HOLD DOWNGRADE BUY 1.20 UP 1.190



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