ARA LOGOS Logistics Trust - CGS-CIMB Research 2021-04-23: Feeling The Strong Demand For Warehouse

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ARA LOGOS LOGISTICS TRUST (SGX:K2LU)

ARA LOGOS Logistics Trust - Feeling The Strong Demand For Warehouse

• ARA LOGOS Logistics Trust’s 1QFY21 DPU of S$0.01353, came in at 26.5% of FY21 DPU forecast.
• Occupancy rate improved y-o-y/qoq while rental reversion increased 0.9% in 1QFY21.
• Reiterate ADD. E-commerce demand should continue to boost demand for warehouse logistics assets. ARA LOGOS Logistics Trust is trading at attractive 7% DPU yield.

ARA LOGOS Logistics Trust reported a strong 1Q21 performance

• ARA LOGOS Logistics Trust (ALOG, SGX:K2LU)’s 1Q21 revenue (Singapore 73%; Australia 27%) increased 8.2% to S$31.1m and NPI rose by 8.7% y-o-y to S$23.9m. The stronger y-o-y results were mainly due to commencement of new leases at several properties as well as higher revenue generated from the Australia portfolio on the back of the strengthening of the Aussie dollar.
• ARA LOGOS Logistics Trust's 1Q21 DPU increased 35.7% y-o-y to S$0.01353, in line at 26.5% of our full-year forecast. Including the S$2.5m retained distributable income in 1Q20 and excluding the capital distribution of S$0.6m, DPU increased 6.6% to S$0.01307.

Operating metrics improved

• ARA LOGOS Logistics Trust’s portfolio occupancy improved further from 98.5% in FY20 to 23% of remaining leases (in terms of gross rental income) up for renewal in FY21. Management believes that the expiring leases could be renewed at flat rental reversion, supported by lower supply and stable demand.

Disposing low yielding asset – Changi DistriCentre 2

• ARA LOGOS Logistics Trust is disposing of Changi DistriCentre 2 at a selling price of warehouse and only 65% occupied at end-20, one of the lowest within ARA LOGOS Logistics Trust’s portfolio. It generated S$1.2m revenue which is only ~1% of the total revenue in FY20. Hence, the disposal has minimal impact on ARA LOGOS Logistics Trust's DPU.
• The divestment should be completed in 2Q21.

Reiterate ADD on ALOG with a higher DDM-based target price of S$0.81

• We maintain our FY21-23F DPU forecast but raise ARA LOGOS Logistics Trust's DDM-based target price to S$0.81 as we reduce our COE assumption from 7.7% to 7.4%. 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 now see ARA LOGOS Logistics Trust as a more diversified REIT with stronger growth prospects with LOGOS onboard as a sponsor. The acquisition of LP Property from its sponsor, LOGOS has been completed on 21 Apr 2021. This will reduce ARA LOGOS Logistics Trust’s AUM exposure in Singapore from 65% to ~50% with the remaining exposure in Australia.
• We reiterate our ADD call. ARA LOGOS Logistics Trust offers attractive dividend yield of 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 2021-04-23

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