Frasers Logistics & Commercial Trust - CGS-CIMB Research 2020-11-06: Stable Performance


Frasers Logistics & Commercial Trust - Stable Performance

  • Frasers Logistics & Commercial Trust's 2H/FY20 DPU broadly within expectations at 50.1%/97.7% of our FY20F forecast.
  • Portfolio occupancy remains stable at 97.5%.
  • Reiterate ADD rating with a higher DDM-based target price of S$1.50.

Frasers Logistics & Commercial Trust's 2H/FY20 results highlights

  • Frasers Logistics & Commercial Trust (SGX:BUOU) achieved gross revenue/net property income of S$213.3m/S$168.3m (+94.6%/+86.5% y-o-y) in 2HFY9/20. Distributable income increased by 81.7% y-o-y to S$124.9m (DPU: 3.65 cents), accounting for c.50.1% of our FY20F forecast.
  • The improved performance was due to expanded contributions from the merger with FCOT and income from new acquisitions, partly offset by income vacuum from asset divestments and S$5.7m in rental waivers and provision for doubtful debt for qualifying SME tenants affected by COVID-19.
  • Frasers Logistics & Commercial Trust's FY20F DPU of 7.12 cents was broadly within our expectations at 97.7% of our forecast. Book NAV stood at S$1.10 at end-4Q as the trust revalued its enlarged portfolio up by 1.8%.

Stable portfolio occupancy

  • In terms of operating metrics, Frasers Logistics & Commercial Trust's portfolio occupancy stood at 97.5%, with a long weighted average lease to expiry (WALE) of 4.9 years.
  • In FY20, Frasers Logistics & Commercial Trust renewed/leased 267,996 sqm of industrial and commercial space, of which 65% were completed in 2H. Rental reversions for its commercial space averaged +8.3% while industrial/logistics spaces were re-contracted at an average -4.4%.
  • Frasers Logistics & Commercial Trust has 7.9% of gross rental income due for renewal in FY21F and a further 11.9% in FY22F. Slightly more than half of the expiries for FY21-22F are from its logistics/industrial properties, largely in Australia, and the remaining are coming mainly from its Singapore and UK commercial assets.

Healthy balance sheet

  • Frasers Logistics & Commercial Trust’s aggregate leverage stands at 37.4% at end-4Q. Interest coverage ratio remains strong at 6.4x, and average cost of borrowing is at 1.9%. It has c.25% of its total debt due to be refinanced in FY21F. With the prevailing low interest rate environment, we believe the trust can likely continue to achieve interest cost savings.
  • In terms of inorganic growth, Frasers Logistics & Commercial Trust is well positioned to tap into acquisition opportunities with its robust balance sheet, significant debt headroom of S$1,651m (based on a 50% gearing ceiling) and deep sponsor pipeline.

Reiterate ADD rating

LOCK Mun Yee CGS-CIMB Research | EING Kar Mei CFA CGS-CIMB Research | https://www.cgs-cimb.com 2020-11-06
SGX Stock Analyst Report ADD MAINTAIN ADD 1.50 UP 1.430