ESR-REIT - OCBC Investment 2021-10-20: Size Matters

ESR-REIT (SGX:J91U) | SGinvestors.io ESR-REIT (SGX:J91U)

ESR-REIT - Size Matters

Proposed merger via a combination of cash and new units in ESR-REIT

DPU accretive on a pro-forma FY20 basis

  • The proposed merger is expected to be DPU accretive with pro-forma FY20 DPU increasing 5.8% and 8.2% for ESR-REIT and ARA LOGOS Logistics Trust respectively, mainly attributable to lower financing cost and payment of upfront land premium.
  • Post-merger, ESR-REIT’s gearing will increase slightly from 41.6% to 42.1% while NAV will be diluted by 6.4% on a pro-forma basis.

Creating a leading new economy and future-ready APAC S-REIT

  • ESR-REIT’s total assets is expected to grow by 59% to S$5.4b with a diversified portfolio of 87 properties across Singapore and Australia post-merger. With an enlarged scale, E-LOG could tap on its sponsor’s strong network and rich pipeline in logistics/warehouse and high-specs industrial properties (i.e. new economy) to undertake sizeable acquisitions and larger asset enhancement initiatives to accelerate E-LOG’s growth and transformation into a leading new economy and future-ready APAC S-REIT.
  • Moreover, E-LOG will benefit from lower tenant concentration risks (no single tenant will account for more than 4.6% of E-LOG’s gross rental income), lower cost of debt, longer weighted average debt expiry of 3.4 years (from 2.6 years), longer WALE of 3.2 years (from 2.8 years), and access to wider pools of capital.

Accept the offer

ESG Updates of ESR-REIT

  • ESR-REIT’s environment score trails its peers due to fewer green-certified buildings in its portfolio relative to peers. However, its human capital development ranks higher than industry average, with comprehensive employee development efforts including strong managerial and leadership development training initiatives

OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2021-10-20
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