FRASERS LOGISTICS & IND TRUST (SGX:BUOU)
Frasers Logistics & Industrial Trust - AUD Weakness Bites
- Frasers Logistics & Industrial Trust's 2QFY19 DPU -2.8% y-o-y in SGD terms.
- Rental reversions -5.3%.
- Share price has performed well.
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
- Frasers Logistics & Industrial Trust’s share price has appreciated 14.6% YTD (as at 29 Apr close).
- Looking ahead, we expect continued impact from the AUD weakness at least in the near-term, and thus lower our AUD-SGD assumption by 1%-2%. However, as we also bring down our risk free rate assumption from 2.7% to 2.3%, our fair value inches up from S$1.19 to S$1.20.
- As Frasers Logistics & Industrial Trust’s share price has performed well, having appreciated 14.6% YTD, we downgrade our recommendation to HOLD.
Andy Wong Teck Ching CFA
OCBC Investment Research
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https://www.iocbc.com/
2019-04-30
SGX Stock
Analyst Report
1.20
UP
1.190
