Frasers Logistics & Industrial Trust - OCBC Investment 2019-07-04: Leveraging On Sponsor Pipeline 


Frasers Logistics & Industrial Trust - Leveraging On Sponsor Pipeline 

  • Estimated initial NPI yield of 5.1%.
  • Healthy portfolio specifications.
  • Expected to be DPU accretive.

Proposed acquisition of 9 properties in Germany and 3 in Australia

  • FRASERS LOGISTICS & INDUSTRIAL TRUST (SGX:BUOU) announced that it has entered into various sale and purchase agreements with its sponsor FRASERS PROPERTY LIMITED (SGX:TQ5) for the acquisition of nine logistics properties in Germany and three logistics properties in Australia.
  • The 12 properties are freehold, 100% occupied, have a young age of 3.7 years and long WALE of 8.6 years. The agreed property purchase price for this portfolio is ~A$644.7m (EUR320.3m or A$519.2m for the German properties and A$125.5m for the Australian properties).
  • We estimate the initial NPI yield for this acquisition to be ~5.1%. We are not surprised with this proposed acquisition, as we had recently highlighted our expectations that Frasers Logistics & Industrial Trust would recycle its capital from recent divestment proceeds into new acquisitions in Australia and/or Europe.

Positive on this transaction

  • We are positive on this transaction given the solid portfolio metrics and the strategic location within the major logistics hubs of Germany and Australia. It will deepen Frasers Logistics & Industrial Trust’s presence in its core markets of Melbourne, Sydney and Brisbane in Australia and expand its geographical footprint in Germany by adding one asset each in Berlin and Frankfurt.
  • Post-acquisition, Frasers Logistics & Industrial Trust will have a strategic presence across all of the key logistics hubs in Germany. Its proportion of freehold assets will increase from 77.6% to 81.7%, portfolio age will decline from 7.7 years to 7.0 years and WALE will be increased from 6.5 years to 6.7 years.

Expected to be DPU accretive

  • Furthermore, this transaction is also expected to be DPU accretive, although the final funding mix (mixture of debt and equity) will only be announced in due course.
  • Based on Frasers Logistics & Industrial Trust’s pro forma 1HFY19 results, this acquisition, coupled with Frasers Logistics & Industrial Trust’s recent divestments, is expected to boost its DPU by 1.4% in AUD terms, and 1.1% in SGD terms. This excludes the one-off estimated capital gains tax on the aforementioned divestments.
  • NAV per unit would have increased by 3.2% in AUD terms and 3.3% in SGD terms, while gearing ratio will increase marginally from 35.1% to 36.1% (assuming proceeds from divestments are used to repay its borrowings).
  • Pending details of the final funding structure and EGM approval, we keep our forecasts for now. Our fair value remains at S$1.20.

OCBC Research Team OCBC Investment Research | 2019-07-04
SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.200 SAME 1.200