ARA LOGOS Logistics Trust - RHB Invest 2020-10-27: Growing Its Australian Presence; Keep BUY

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

ARA LOGOS Logistics Trust - Growing Its Australian Presence; Keep BUY

  • ARA LOGOS Logistics Trust (SGX:K2LU)’s sizeable acquisition of ten Australian assets demonstrates sponsor LOGOS’ ability to grow the REITs portfolio with quality assets. Despite a mildly dilutive transaction, we like the deal for its long WALE (11.3 years) with built-in rent escalations and tenant quality.
  • ARA LOGOS Logistics Trust also has a rights of first refusal to acquire the remaining fund stake, providing room for growth. The valuation is reasonably attractive with stock trading at 1x P/BV.



A transformational deal.

  • ARA LOGOS Logistics Trust announced its proposed acquisition of five properties in Brisbane, Australia (including a development asset which is expected to be completed in Nov 2021) for SGD225.9m. In addition it has also made a fund investment of 49.5% and 40% in New LAIVS Trust (LT) and Oxford Property Fund (OP) which combined own five logistic properties for SGD178.5m.
  • Five of the assets are freehold with remaining five under leasehold tenures but management is confident that leases can be extended. The assets blended NPI yield of 5% is comparable to that of recent acquisitions of Australian logistic assets by other S-REITs in.
  • Post-acquisition, 48% of ARA LOGOS Logistics Trust's total assets will be Australian-based, up from 33% currently, in line with ARA LOGOS Logistics Trust’s stated objective of diversifying out of Singapore.
  • The transaction needs an EGM approval and is expected to be completed by the end of the year.


A long WALE of 11.3 years

  • A long WALE of 11.3 years with no lease break clauses is one of the key highlights of the deal in our view, which offers a good income visibility under the current volatile market conditions. In addition, all the leases have inbuilt rent escalations of 2.5% to 4% pa, providing organic growth. ARA LOGOS Logistics Trust also has rights of first refusal to acquire the remaining stake in the fund.
  • Overall occupancy stands at 97% with management noting that rents currently in place are in line with market.
  • Post-acquisition, ACFS (Australia’s largest privately owned container logistics operator) and IPS logistics will become part of the top 10 tenants, accounting for 12% of total rental income.

Deal is mildly dilutive to pro-forma DPU and NAV.






Vijay Natarajan RHB Securities Research | https://www.rhbinvest.com.sg/ 2020-10-27
SGX Stock Analyst Report BUY MAINTAIN BUY 0.72 SAME 0.72



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