FRASERS LOGISTICS & COMMERCIAL TRUST (SGX:BUOU)
Frasers Logistics & Commercial Trust - Remains On A Solid Footing
- Frasers Logistics & Commercial Trust's 1HFY21 DPU rose 9.5% y-o-y to 3.80 cents.
- Seeing higher level of leasing enquiries.
- Room for further inorganic growth.
Frasers Logistics & Commercial Trust (FLCT)'s 1HFY21 results exceeded our expectations
- Frasers Logistics & Commercial Trust (SGX:BUOU) reported a solid set of 1HFY21 results which beat our expectations. Gross revenue and adjusted NPI jumped 95.1% and 79.3% y-o-y to S$231.7m and S$173.9m, respectively. DPU grew 9.5% to 3.80 cents and accounted for 52.4% of our FY21 forecast.
- Growth was driven largely by the consolidation of Frasers Commercial Trust for a full half year, contribution from acquisitions and favourable currency effects (stronger AUD and EUR relative to the S$).
- Frasers Logistics & Commercial Trust only saw approximately S$1.2m of negative impact from the COVID-19 pandemic, and this was mainly due to concessions for its retail tenants in Singapore and Australia.
Seeing broad-based increase in leasing enquiries
- Frasers Logistics & Commercial Trust’s portfolio occupancy stood at 96.8%, which was a slight decline of 0.4 percentage points (ppt) q-o-q. Its logistics & industrial portfolio remained fully occupied, but vacancies for its commercial portfolio rose 1 ppt to 7.4%. Notwithstanding this, we understand that Frasers Logistics & Commercial Trust has seen a broad-based increase in leasing enquiries for its commercial and business park assets (demand for logistics and industrial portfolio remains firm).
- For Cross Street Exchange in Singapore, the level of enquiries has increased by 3-4x in the last 1-2 months as compared to 6-9 months ago for both its office and retail components, and management is optimistic of closing some leasing deals in the quarter, although rental reversions could be flattish to slightly negative. It also remains to be seen on how the recent spike in community COVID-19 cases and new restrictive measures would impact this leasing momentum.
- In Australia, improvement in commercial leasing enquiries have also picked up, supported in part by a rebound in the resources sector, while higher enquiries in the Thames Valley in the UK was also observed, with flight to quality and desire for lower density the main drivers.
- Overall portfolio rental reversions was flat at +0.1% in 2QFY21 (1QFY21: -6.9%), as positive rental reversions in Frasers Logistics & Commercial Trust’s commercial leases (Singapore: +3.7%; Australia: +9.9%) was offset by rental reversions of -3.6% for its Australian industrial portfolio.
Next major acquisition could come from business parks
- Management highlighted that there is quite a disparity in cap rates between business park and logistics assets, with the range for the former at around 5.5-7% in the UK. We see this as a hint that Frasers Logistics & Commercial Trust could be looking more closely at UK business parks as its next major avenue of inorganic growth. This would be supported by stable rental expectations and Frasers Logistics & Commercial Trust’s healthy aggregate leverage ratio of 35.3% (-0.9 ppt q-o-q).
- We lift our Frasers Logistics & Commercial Trust's FY21F and FY22F DPU forecasts by 4.7% and 3.2%, respectively, and also increase our risk-free rate assumption from 1.55% to 1.9%. Our fair value estimate for Frasers Logistics & Commercial Trust remains unchanged at S$1.62. BUY.
- See
- Frasers Logistics & Commercial Trust's Share Price,
- Frasers Logistics & Commercial Trust's Target Price,
- Frasers Logistics & Commercial Trust's Analyst Reports,
- Frasers Logistics & Commercial Trust's Dividend History,
- Frasers Logistics & Commercial Trust's Announcements,
- Frasers Logistics & Commercial Trust's Latest News.
OCBC Research Team
OCBC Investment Research
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https://www.iocbc.com/
2021-05-07
SGX Stock
Analyst Report
1.62
UP
1.590
