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ESR-LOGOS REIT - OCBC Investment 2022-05-11: Paving The Way Ahead

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

ESR-LOGOS REIT - Paving The Way Ahead




A newly formed REIT

  • The merger of ESR-REIT (SGX:J91U) with ARA LOGOS Logistics Trust (SGX:K2LU) completed on 28 Apr 2022. ARA LOGOS Logistics Trust was subsequently delisted from the SGX on 5 May 2022. The newly formed REIT will be renamed as ESR-LOGOS REIT (SGX:J91U).
  • For the first 100 days post-merger, ESR-LOGOS REIT will focus on integration, asset business plan i.e. divestments/asset enhancement initiatives (AEIs) opportunities, as well as evaluation of acquisitions and redevelopment potential.
  • Factoring the impact of the merger, we reduce our DPU estimates for FY22-26 by 0.8%-4.3% due to enlarged unit base and higher utility costs. After adjustments, our fair value estimate for ESR-LOGOS REIT decreases marginally from S$0.52 to S$0.50.


Leveraging growth opportunities in New Economy properties

  • Post-merger, ESR-LOGOS REIT will increase its income diversification to Australia to 13% by rental income while 87% is derived from Singapore. With the addition of ARA LOGOS Logistics Trust’s portfolio, ESR-LOGOS REIT’s exposure to New Economy asset will increase from 47% to 66%. This provides ESR-LOGOS REIT outsized exposure to benefit from the largest secular growth opportunity in Asia.
  • With an enlarged scale, ESR-LOGOS REIT could tap on its sponsor’s strong network and rich pipeline of US$2b of visible and executable New Economy assets to undertake sizeable acquisitions. Future acquisitions are likely to focus on freehold assets in Singapore, Australia, and Japan.

1Q22 DPU fell 9.6% y-o-y due to enlarged unit base






Chu Peng OCBC Investment Research | https://www.iocbc.com/ 2022-05-11
SGX Stock Analyst Report BUY MAINTAIN BUY 0.50 DOWN 0.52



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