ARA LOGOS Logistics Trust (Previously Cache Logistics Trust) Analysis @ 29 June 2020

Basic Profile & Key Statistics

ARA LOGOS Logistics Trust (ALOG) previously known as Cache Logistics Trust, the renaming was announced on 28 April 2020. In 2018, CWT Limited (previous sponsor of Cache Logistics Trust) sold all its stake to manager, ARA. In 2019, ARA announced that it would sell 10% stake to LOGOS Property. In 2020 March, ARA announced completion on its acquisition of a majority stake in LOGOS Group. 

ALOG has adopted half-yearly reporting of financial statement but would provide quarter business update. However, ALOG is maintaining its quarter distribution policy. ALOG is considered a small cap REIT with market cap of S$ 0.61 billions. 

Lease Profile

Occupancy rate is high at 97.1%, however WALE is quite short for logistics sector. Although more number of properties are situated in Australia, majority income is still come from Singapore properties. As majority income is from Singapore properties, short weighted average land lease expiry is expected. Highest lease expiry fall in the FY2021 at 33% of GRI, this post a slight concentrated lease expiry risk.

Debt Profile

Gearing Ratio is quite high, it is currently no.4 highest among SREITs. Cost of debt is high, this is expected as its unsecured debt is high. Fixed rate debt and interest cover ratio are lower than SREITs median. WADE is considered quite long at 3.8 years. However, 44% of its debt is matured at 2024 which post a concentrated debt maturity risk. Should refinance is not granted by issuers at that point of time, then things would go ugly.

Diversification Profile

ALOG has been acquiring properties in Australia since 2015, where it slowly improve its geographical diversification. However, ALOG is still not diversified enough in geographical, properties and tenants as compare to SREITs median.

Key Financial Metrics

Property yield and distribution on capital are higher than median. Management Fees is in median range, which unitholder receive $7.5 for every dollar of management fee being paid. Distribution margin is slightly lower than median. Rental support come from vendor in relation to acquisition of the property in Altona, VIC, AUST which was completed on 29 Apr 2019, which is amounted to A$ 1.67 mils and distribute equally over 2 years.

DPU & NAV Trend

Both DPU and NAV per unit have been dropping. Now after all dusts have settled, hopefully management team can improve on its performance. 

Fundamental Valuation

Favorable	Less Favorable
Occupancy	WALE
Unsecured Debt	Weighted Average Land Lease Expiry
WADE	Gearing
Distribution on Capital	Cost of Debt
	Top Geographical
	Top Property
	Top Tenant
	Top 10 Tenants
	Interest Cover
	Dropping NAV trend
	Dropping DPU trend

It would require great effort and time to turn around. 

Relative Valuation

i) Average Dividend Yield

Average value at 8.16%, apply past 4 quarters' DPU of 5.007 cents will get S$ 0.61. However, if we consider DPU without retention due to COVID situation, DPU would be 5.236 cents, which translate into S$ 0.64.    

ii) Average Price/NAV 

Average value is at 1.09, apply latest NAV of $0.56 will get S$ 0.61

Author's Opinion

At this moment, it is still early to tell whether management would be able to turn things around. Hopefully things would get better from here. Let's sum out the valuation:

i) Fundamental Intrinsic Value = (Removed)

ii) Relative Valuation - Dividend Yield = S$ 0.64

iii) Relative Valuation - Price/NAV = S$ 0.61

At current price of $0.555, it is still slightly low price in term of relative valuation. 

*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee the accuracy, completeness, and reliability. It should not be taken as financial advice or statement of fact. I shall not be held liable for errors, omissions as well as loss or damage as a result of the use of the material in this blog. Please always do your own due diligence before any decision is made.