ARA LOGOS Logistics Trust - DBS Research 2020-04-29: ARA Entering A New Era


ARA LOGOS Logistics Trust - ARA Entering A New Era

  • Cache Logistics Trust (SGX:K2LU) has changed its name to ARA LOGOS Logistics Trust (SGX:K2LU) to reflect combined capabilities from partnership.
  • Revenue increased 5.8% q-o-q to S$28.8m underpinned by higher occupancy.
  • DPU of 0.997 Scts; approximately 20% of distribution was retained in 1Q20.
  • Majority of leases expiring in FY20 have been renewed; only 8.1% of expiries remain for the year.

Rebranding to reflect capabilities of Sponsors

Relatively strong operating performance despite ongoing COVID-19 pandemic

  • ARA LOGOS Logistics Trust's gross revenue of S$28.8m and NPI of S$22.0 were 5.8% and 7.6% higher q-o-q.
    • Due to higher occupancies and commencement of new leases.
    • A decline of 7.4% in NPI y-o-y due to the conversion of Gul LogisCentre from a master-lease to multi-tenancy property.
  • Distributable income of S$13.4m was 10.3% lower q-o-q.
    • Lack of a one-off distribution of S$2.3m divestment gain from Jinshan in 4Q19.
    • Excluding the one-off divestment gain, distribution income would have been 5% higher q-o-q.
    • Capital distribution for 1Q20 was retained to provide for potential cash flow needs in the near future; S$0.5m of capital distribution in 4Q19.
  • ARA LOGOS Logistics Trust's DPU of 0.997 Scts for 1Q20 after the retention of income for potential rental deferments/waivers in the coming quarters.
    • DPU was 28% lower q-o-q; 20% of distributable income was retained in 1Q20. Without this retention of income and the effect of the divestment gains for 4Q19, underlying DPU would have increased c.10% q-o-q.
  • Property tax rebates for its Singapore assets of S$2.2m will be fully passed on to tenants. So far, a significant number of tenants in Singapore (up to 40%) have come forward to enquire about rental deferments. ARA LOGOS Logistics Trust will assess these enquires on a case-by-case basis and only consider the genuine requests.

Stable capital management metrics

  • Gearing inched up from 40.1% (4Q19) to 40.8% (1Q20) due to weaker AUD. NAV also declined from S$0.59 to S$0.56 due to weaker AUD.
  • Financing costs fell by 21bps to an improved 3.63% in 1Q20.
  • Interest coverage ratio was maintained at a healthy 3.7x.
  • No refinancing required for the rest of FY20; debt maturity of 3.8 years.

Strong portfolio performance

  • ARA LOGOS Logistics Trust's portfolio occupancy improved from 95.3% (4Q19) to 97.1% (1Q20).
    • Mainly due to a 3.0% improvement in occupancy for Singapore portfolio to 97.2%
    • Occupancy in Australia declined from 99.6% (4Q19) to 96.9% (1Q20)
  • More than 1.1m sqft of leases were secured in 1Q20; marginal negative rental reversion of 0.1%.
    • 897,700 sqft of rent renewals, 218,100 of new leases.
  • Majority of leases due to expire in FY20 have been renewed, with only 8.1% (by gross rental income) of expiries remaining.
    • Compared to the 20.6% of expiries reported in 4Q19.
  • Portfolio WALE remained relatively stable at 2.9 years.
  • Portfolio NPI yield improved 0.2% q-o-q to 7.2% for 1Q20.
    • Mainly led by 0.3% improvement in the Singapore portfolio to 7.5%.
    • NPI yield for Australia portfolio decreased by 0.4% q-o-q to 6.5% mainly due to higher valuations of Australian properties.

Maintain HOLD with a lower TP

Dale LAI DBS Group Research | Derek TAN DBS Research | https://www.dbsvickers.com/ 2020-04-29
SGX Stock Analyst Report HOLD MAINTAIN HOLD 0.56 DOWN 0.75