ARA LOGOS Logistics Trust - Maybank Kim Eng 2020-10-26: Entrenching In Australia

ARA LOGOS LOGISTICS TRUST (SGX:K2LU) | SGinvestors.io ARA LOGOS LOGISTICS TRUST (SGX:K2LU)

ARA LOGOS Logistics Trust - Entrenching In Australia


ARA LOGOS Logistics Trust adding 10 properties in Australia at 5.0% NPI yield

  • ARA LOGOS Logistics Trust (SGX:K2LU) has accelerated its overseas expansion with its new sponsor; its SGD404.0m deal to acquire five logistics properties and invest in two funds at 5.0% NPI yield should boost its AUM by 28.2%, and deepen its Australian contribution from 32.5% to 47.6%. See ARA LOGOS Logistics Trust Announcements.
  • While DPU and NAV dilutive, ARA LOGOS Logistics Trust's DPU visibility should improve from the assets’ long 11.3-year WALE. We maintain our forecasts and DDM-based Target Price (COE: 8.7%, LTG: 1.5%), pending deal closure.
  • For now, ARA LOGOS Logistics Trust's valuations are compelling at 8+% FY21 dividend yield, with catalyst from a stronger-than-expected DPU recovery. BUY.



Announces maiden deal with new sponsor

  • ARA LOGOS Logistics Trust has proposed to acquire from its sponsor five logistics assets in Australia for SGD225.9m and also invest SGD178.5 in two property funds; a 49.5% interest in New LAIVS Trust and a 40.0% interest in Oxford Property Trust which together hold another five properties.
  • All properties are well-placed across essential economic hubs in Australia’s east coast. They are 97.0% occupied and backed by an 11.3-year WALE by NLA, with the leases embedded with +2.5-4.0% pa rental escalations. Five assets or 45.3% of the total 1.0m sqm are freehold, with the rest (four in the Port of Brisbane) sited on long-dated ground-leases of 39-51 years remaining.


Strong tenancies, longer WALE lifts DPU visibility

  • Leases for the portfolio are backed by established tenancies; all are new and should help in diversification while strengthening its exposure to the resilient cold storage sector. Its submarket vacancies at 2.4-5.8% are below the industry’s 3.3-5.8% and could tighten further, driven by favourable demand-led fundamentals underpinned by rising e-commerce growth.
  • We expect ARA LOGOS Logistics Trust's DPU visibility to improve from its longer portfolio WALE, which jumps from 2.8 years to 4.6 years post-deal.

DPU, NAV dilution is a slight negative






Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2020-10-26
SGX Stock Analyst Report BUY MAINTAIN BUY 0.800 SAME 0.800



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