ARA LOGOS Logistics Trust - Maybank Kim Eng 2021-01-27: Small-Cap Pure Logistics Play


ARA LOGOS Logistics Trust - Small-Cap Pure Logistics Play

ALLT delivered strong 2H20 with > 8% dividend yield

  • ARA LOGOS Logistics Trust (SGX:K2LU) delivered strong 2H20, with DPU up 8.9% y-o-y and 26.0% h-o-h on the back of improving portfolio occupancy (from 97.0% to 98.5%) and +9.8% rental reversion (+4.8% for FY20).
  • ARA LOGOS Logistics Trust's fundamentals are sound, underpinned by strong leasing momentum into FY21 and better DPU visibility from its higher Australian contributions. Logistics vacancies in Singapore should fall further on strong demand while NPI is set to rise as rental recovery gains pace.
  • ARA LOGOS Logistics Trust's valuations are compelling at > 8% FY21 dividend yield, with catalyst from a stronger-than-expected DPU recovery. We maintain our forecasts and DDM-based target price S$0.80 (COE: 8.7%, LTG: 1.5%). BUY.

Stable occupancy in Singapore

  • Singapore’s 2H20 revenue rose 3.1% h-o-h and 12.5% y-o-y to S$44.1m (74% of total revenue). ARA LOGOS Logistics Trust's FY20 revenue rose 4.4% y-o-y, driven by the commencement of new leases at Commodity Hub, Gul LogisCentre and Changi DistriCentre 1 and additional contribution from DHL Supply Chain ARC. This partially offset transitory downtime between leases at Pandan Logistics Hub and Cold Centre.
  • Occupancy was stable at 98.7% as of end-Dec 2020, with CWT’s contribution down further from 5.8% to 4.5%. Leasing activity was strong, with 1.2m sf secured in 2H20 (c.13% of its total NLA), versus S$1.5m sf in 1H20, and with growth momentum into the year.

Entrenching in Australia at 5.0% NPI yield

  • ARA LOGOS Logistics Trust accelerated its overseas expansion with its new sponsor in FY20. Its S$404.0m acquisition of five logistics properties and investment in two funds at 5.0% NPI yield should boost its AUM by 28.2%, and deepen its Australian contribution from ~33% to ~48%.
  • While DPU and NAV dilutive, its DPU visibility should improve from the assets’ long 11.3-year WALE, and leases embedded with +2.5-4.0% pa rental escalations. They are backed by established tenancies; all are new and should help in diversification and strengthen its exposure to the resilient cold storage sector.

New sponsor adds deal pipeline, growth prospects

Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-01-27
SGX Stock Analyst Report BUY MAINTAIN BUY 0.800 SAME 0.800