ARA LOGOS Logistics Trust - DBS Research 2020-07-29: Stockpiling Its Way Forward


ARA LOGOS Logistics Trust - Stockpiling Its Way Forward

  • ARA LOGOS Logistics Trust's DPU increased 33% q-o-q to 1.326 Scts in 2Q20; outperforming its peers.
  • Only S$0.5m of retained income has been disbursed and remaining S$2.0m to provide buffer for next two quarters.
  • Increase in demand from tenants who are stockpiling and those in e-commerce.

Robust operating performance: DPU increased 33% q-o-q

  • ARA LOGOS Logistics Trust (SGX:K2LU)'s gross revenue of S$29.0m in 2Q20 was 0.8% higher q-o-q due to commencement of new leases; Mainly from Commodity Hub, Cold Centre and Gul Logiscentre.
  • NPI of S$21.9m in 2Q20 was 0.6% lower q-o-q due to higher property expenses. Higher property expenses incurred for precautionary measures taken at its Singapore properties to combat the COVID-19 pandemic
  • ARA LOGOS Logistics Trust's 2Q20 distributable income was 33.0% higher q-o-q. Including the impact of S$2.5m retained in 1Q20, followed by the disbursement of S$0.5m in 2Q20. Excluding the retention and disbursement, distributable income would have been up 4.6% q-o-q.
  • S$0.5m in retained income has been disbursed in 2Q20 to offset some provisions made for doubtful debt and rental rebates made in 2Q20.
  • ARA LOGOS Logistics Trust's rental collection rate remains very robust at more than 94% to date.
  • Its 1H20 DPU of 2.323 Scts is 18.0% lower y-o-y mainly due to one-off divestment gains in 1H19.
    • c.S$3.8m in divestment gains and capital distribution were included in 1H19 DPU.
    • Excluding the one-off distribution in 1H19 and excluding the income retained in 1H20, DPU would have been 1.8% higher y-o-y.

Capital management: Gearing inched down to 40.4%

  • ARA LOGOS Logistics Trust's gearing of 40.4% in 2Q20 was 0.4% lower q-o-q. All-in cost of borrowing of 3.45% in 2Q20 was 0.18ppt lower q-o-q.
  • Weighted average debt maturity of 3.5 years; no refinancing required until December FY21.

Healthy portfolio metrics: Occupancy of Singapore portfolio increased 1.4ppts q-o-q

  • ARA LOGOS Logistics Trust's portfolio occupancy was relatively stable at 97.0% in 2Q20 as compared to 97.1% in 1Q20
    • Singapore portfolio occupancy increased 1.4%ppts to 98.6%.
    • Australia portfolio occupancy declined 2.2ppts q-o-q to 94.7%, due to non-renewal at one asset.
  • Rental reversions in 1H20 declined 0.5%; declined c.1.8% in 2Q20.
    • Negative rental reversion in 2Q20 mainly attributed to a tenant expanding its lease at lower rents.
    • Excluding this lease, rental reversions would have been relatively flat.
  • 1.5m sqft of leases renewed and signed in 1H20.
    • Expecting an increase in demand for tenants who are stockpiling and are in the e-commerce sub-sectors.
    • Demand in also driven by tenants who are undergoing consolidation and expansion.
  • Only 5.2% of leases (by GRI) are due to expire for the rest of FY20.
    • Expiries mainly from third-party logistics tenants at Commodities Hub; expect forward rental reversions to be mainly flat.
    • May see some negative rental reversion for leases that were signed 3-4 years ago; signing rents then were very high.
  • S$2.2m in property tax rebates have been passed on to tenants. c.20 SME tenants have enquired about rental deferments.

Looking forward: Exciting prospects ahead

  • ARA LOGOS Logistics Trust continues to be in the hunt for acquisitions both from its new Sponsor, as well as from third parties. Pipeline acquisitions from LOGOS are mainly in Asia and Australia. Properties in Singapore, Australia, China and Korea would complement ARA LOGOS Logistics Trust’s portfolio.
  • Will evaluate potential acquisitions based on a combination of factors including accretion to DPU, future earnings upside, long and stable leases, ability to extend portfolio land lease tenure, etc.

Our views:

Dale LAI DBS Group Research | Derek TAN DBS Research | https://www.dbsvickers.com/ 2020-07-29
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