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ESR-LOGOS REIT - Maybank Research 2022-08-24: A Newer New-Economy Play; Growth On A New Lease

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

ESR-LOGOS REIT - A Newer New-Economy Play; Growth On A New Lease

  • ESR-LOGOS REIT (SGX:J91U) has emerged from its merger with ARA LOGOS Logistics Trust (SGX:K2LU) as one of the top 10 S-REITs by free float, with higher contributions from new-economy AUM.
  • We see visible growth drivers from:
    1. quality AUM growth from new-economy assets;
    2. stronger fundamentals and growth in Australia;
    3. visible sponsor pipeline, supported by added debt headroom;
    4. dividend yield readjustment to match up to industrial peers.
  • ESR-LOGOS REIT's valuations are undemanding at 7.4% FY23E yield, and 0.6% DPU growth.



New-economy assets underpin growth outlook

  • ESR-LOGOS REIT has S$5.5b AUM post-merger (vs. S$3.3b), boosted by newly added new-economy assets. We see stronger rental income from new-economy assets (~63% vs 47% of effective gross rent pre-merger) due to pent-up demand caused by supply chain disruptions and relocation post-COVID recovery, and rising e-commerce.
  • The addition of mature assets further increases occupancy (to 94.1% in 1H22 from 92% in 4Q21). We expect more functional upgrades from asset enhancement initiatives (AEI) to ride on the rental growth momentum.


Diversified footprint in developed markets

  • The S$2.2b additional assets are in good locations in Singapore and Australia, which would help ESR-LOGOS REIT gain a stronger foothold in key Australian markets. We expect robust contributions from the Australia portfolio due to the strong fundamentals, underpinned by historical low occupancy.
  • We see room for revaluation gains on the back of cap rates compression.

Robust balance sheet, growth backed by sponsor






Li Jialin Maybank Research | https://www.maybank-ke.com.sg/ 2022-08-24
SGX Stock Analyst Report BUY INITIATE BUY 0.55 SAME 0.55



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