Frasers Logistics & Commercial Trust - CGS-CIMB Research 2020-08-04: Active Leasing Activities In 3Q


Frasers Logistics & Commercial Trust - Active Leasing Activities In 3Q

  • Frasers Logistics & Commercial Trust's 3QFY9/20 distributable income of S$61.1m is deemed in line with expectations, at 30% of our FY20F forecast.
  • It announced a proposed acquisition of two new assets in Australia and UK.
  • Reiterate ADD, with an unchanged DDM-based Target Price of S$1.43.

Highlights from Frasers Logistics & Commercial Trust's 3QFY9/20 business update

  • In its maiden post-merger 3QFY9/20 business update, Frasers Logistics & Commercial Trust (SGX:BUOU) achieved a gross revenue of S$103.7m (+91.9% y-o-y). Distributable income expanded by 83.5% y-o-y to S$61.1m, accounting for c.30% of our FY20F forecast.
  • Frasers Logistics & Commercial Trust's book NAV stood at S$1.04 at end-3Q, while aggregate leverage was at 37.4%, with total gross borrowings of S$2.3bn. Interest coverage ratio remains strong at 6.7x, and average debt maturity is at 3.2 years.

Stable portfolio occupancy, active leasing in 3Q

  • In terms of operating metrics, Frasers Logistics & Commercial Trust's portfolio occupancy stood at 97.2%, with a long weighted average lease to expiry (WALE) of 5.2 years.
  • During the quarter, Frasers Logistics & Commercial Trust saw active leasing activities, with c.135k sq m of renewals/new leases, representing 5.2% of its portfolio lettable area. The bulk of leasing activities were in the logistics/industrial segment, where it recorded a negative 3.9% rental reversion.
  • In Singapore, its rental reversions averaged +10.6%, particularly post the asset enhancements undertaken at Cross Street Exchange and Alexandra Technopark. Frasers Logistics & Commercial Trust has a remaining 1% of gross rental income due for renewal in 4QFY20F and a further 8.1% in FY21F, largely in Australia.

Proposed acquisition of two properties in Australia and UK

  • As part of its active asset management strategy, Frasers Logistics & Commercial Trust has also announced the proposed purchase of two properties — the IVE facility in Australia and Maxis Business Park in UK — from its sponsor at a slight c.1.2% discount to the agreed property value. These properties are 100% occupied and have a long WALE of 4.9-6.7 years. The total transaction cost of S$92.4m will be fully funded by existing debt facilities or internal resources.
  • At the same time, it announced the divestment of its remaining 50% stake in 99 Sandstone Place for A$152.5m, a 12.2% premium above its Jul 2020 book value. Frasers Logistics & Commercial Trust expects to record a net gain of A$8m from this sale.

Reiterate ADD rating

LOCK Mun Yee CGS-CIMB Research | EING Kar Mei CFA CGS-CIMB Research | https://www.cgs-cimb.com 2020-08-04
SGX Stock Analyst Report ADD MAINTAIN ADD 1.430 SAME 1.430