ARA LOGOS Logistics Trust - Maybank Kim Eng 2020-07-28: Upping The Lease

ARA LOGOS LOGISTICS TRUST (SGX:K2LU)

ARA LOGOS Logistics Trust - Upping The Lease

ARA LOGOS Logistics Trust (SGX:K2LU)’s 2Q20 DPU, which rose 0.4% y-o-y and jumped 33.0% q-o-q, was in line with our estimates and ahead of the street. Management released SGD0.5m of the SGD2.5m distributable income that was retained in 1Q20.
ARA LOGOS Logistics Trust's fundamentals remain sound, underpinned by strong leasing momentum into 2H and better DPU visibility from its higher Australian contributions. Logistics vacancies in Singapore have compressed on strong demand and NPI looks set to recover as rental recovery gains pace.

Valuations are compelling at 8+% FY20 dividend yield, with catalyst from a stronger-than-expected DPU recovery.
We maintain our forecasts and DDM-based Target Price SGD0.80 (COE: 8.7%, LTG: 1.5%). BUY.

ARA LOGOS Logistics Trust's revenue / NPI rose 4.3% / 7.0% y-o-y in 2Q20 as new leases commenced at ALOG Commodity Hub, Cold Centre and Gul LogisCentre.
Singapore’s revenue rose 5.0% y-o-y, on our estimates, as its committed occupancy picked up q-o-q from 97.2% to 98.6% as of end-Jun 2020. CWT’s contribution continued to fall, from 9.8% to 7.9%, and is expected to dip further to 5.9% of its gross rental income from Jul 2020. ARA LOGOS Logistics Trust has secured 270.1k sf of new lease commitments in 2Q20 (3% of its total NLA), up 23.8% q-o-q, and we see strong leasing momentum into 2H.

Revenue from Australia rose 2.0% y-o-y, with the added rental contribution from 182-198 Maidstone Street in Altona, Victoria that was acquired in Apr 2019, as committed occupancy fell q-o-q from 96.9% to 94.7%. Supply remains tight with demand fundamentals (from e-commerce, essential goods, pharmaceutical supplies, and medical equipment) sound, which should support both occupancies and rents.
Australia’s 3.0-year WALE supports its 2.8-year portfolio WALE and improves DPU visibility.

ARA LOGOS Logistics Trust's aggregate leverage was 40.4%, leaving SGD170m in debt headroom (at 45% leverage limit).
With a new CEO in place, and a stronger sponsor (LOGOS) with a growing USD7.0b AUM pipeline in China, India, Southeast Asia, and Australia & New Zealand, we see upside to its capital recycling efforts.
See ARA LOGOS Logistics Trust Share Price; ARA LOGOS Logistics Trust Target Price; ARA LOGOS Logistics Trust Analyst Reports; ARA LOGOS Logistics Trust Dividend History; ARA LOGOS Logistics Trust Announcements; ARA LOGOS Logistics Trust Latest News.

Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2020-07-28

SGX Stock Analyst Report BUY MAINTAIN BUY 0.80 SAME 0.80