ARA LOGOS Logistics Trust - CGS-CIMB Research 2021-01-26: Seeing Strong Demand For Warehouse Space

ARA LOGOS LOGISTICS TRUST (SGX:K2LU)

ARA LOGOS Logistics Trust - Seeing Strong Demand For Warehouse Space

ARA LOGOS Logistics Trust's FY20 DPU of 5.25 cents which includes 0.11 cents capital distribution came in above expectations. ARA LOGOS Logistics Trust released the S$2m income retained from 1Q20.
Strong rental reversion of +4.8% in FY20 while occupancy remained high.
We raise ARA LOGOS Logistics Trust's FY21-22 DPU forecasts by 4~5%.

ARA LOGOS Logistics Trust (SGX:K2LU)’s FY20 revenue increased 3.4% to S$117.4m and NPI rose by 4.8% y-o-y to S$90m. See ARA LOGOS Logistics Trust Announcements. The stronger y-o-y results were mainly due to stronger 2H performance driven by commencement of new leases at ALOG Commodity Hub, Gul LogisCentre, Changi DistriCentre 1 and Pandan Logistics Hub and additional revenue from DHL Supply Chain ARC which offset the lease expiry at 11-19 Kellar Street, Berrinba.
On an enlarged share base basis, primarily from equity fund raising to fund its maiden acquisitions, ARA LOGOS Logistics Trust's FY20 distribution of S$0.0525/unit (-4.9% y-o-y) came in above our FY20 forecast of S$0.0478/unit as the REIT released the entire S$2.5m distributable income retained in 1QFY20 and made a one-off capital distribution of S$1.3m. Excluding one-off distributions, ARA LOGOS Logistics Trust's FY20 distribution would have risen by 8.8% y-o-y to S$0.05152/unit.

ARA LOGOS Logistics Trust’s portfolio occupancy improved from 95.3% in FY19 to 98.5% in FY20. ARA LOGOS Logistics Trust achieved strong FY20 rental reversion of +4.8% vs -0.3% in FY19. It achieved strong rental reversion of +9.8% in 2H20, mainly driven by the renewal of single tenant lease at Schenker Megahub. With this renewal, it has removed one of the larger lease renewal risks for FY21.
ARA LOGOS Logistics Trust has 27.5% of remaining leases up for renewal in FY21 by GRI (gross rental income). Management believes that the expiring leases could be renewed by at least flat rental reversion, supported by lower supply and stable demand.

ARA LOGOS Logistics Trust's overall portfolio valuation increased by 2%. Singapore portfolio valuation declined 1.9% y-o-y due to shorter remaining land lease tenure of ALOG Commodity Hub which is one of the largest modern ramp-up warehouses in Singapore and Southeast Asia. ALOG Commodity Hub is located in Jurong Industrial estate, a key logistics cluster near the seaport.
The lower valuation from Singapore is offset by the higher valuation from ARA LOGOS Logistics Trust's Australia portfolio of which the value increased by 10.3% y-o-y due to stronger A$ against S$ and cap rate compression. Excluding forex effect, Australia portfolio valuation increased by 2.5% y-o-y.
On the acquisition front, Australia and Singapore remain as in geographic focus given its existing presence in these countries.

We raise our ARA LOGOS Logistics Trust's FY21-22F DPU forecasts by 4~5% to factor in lower financing cost and lower unit base due to higher unit price.
See ARA LOGOS Logistics Trust Share Price; ARA LOGOS Logistics Trust Target Price; ARA LOGOS Logistics Trust Analyst Reports; ARA LOGOS Logistics Trust Dividend History; ARA LOGOS Logistics Trust Announcements; ARA LOGOS Logistics Trust Latest News. We reiterate our ADD call with a higher DDM-based target price of S$0.75. ARA LOGOS Logistics Trust offers attractive dividend yield of more than 7%.
Re-rating catalysts/downside risks include accretive acquisitions/weaker-than-expected rental reversion.

EING Kar Mei CFA CGS-CIMB Research | LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2021-01-26

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