Frasers Logistics & Commercial Trust Review @ 30 May 2022

Basic Profile & Key Statistics

• Main Sector(s): Office, Industrial & Logistics
• Country(s) with Assets: Australia, Singapore, Germany, England & Netherlands
  
• No. of Properties (exclude development/associate/fund): 101

Performance Highlight

Gross revenue, NPI, distributable income and DPU have improved yoy due to full contribution from the 6 properties in Germany, the Netherlands and the United Kingdom that acquired in 2021 but partially offset by divestment of Sandstone Place and 3 properties in South Australia.

Rental Reversion

Portfolio rental reversion is at -6.4% based on final year rent of outgoing lease versus first-year rent of incoming lease. It would be +2.6% based on the average rent of incoming lease versus average rent of the outgoing lease.

Acquisition, Divestment & Development

On January, FLCT has completed the acquisition of the land for prime warehouse development, which the development is target to complete by early 2023. The development of ‘Connexion II’ at Blythe Valley Park in the UK is ongoing and target to complete by end 2022. FLCT has divested the Cross Street Exchange at 28.3% premium to book value on 31 March. 

Sensitivity to Interest Rate

For every 0.5% interest rate increase, the DPU is impacted by 0.05 cents, which is around 0.7%.

Related Parties Shareholding

• REIT sponsor's shareholding: Below median for more than 10%
• REIT manager's shareholding: Below median for more than 20%
• Directors of REIT manager's shareholding: Above median for more than 20%

Lease Profile

• Occupancy: ± 5% from median
• WALE: Above median for more than 10%
• Highest lease expiry within 5 years: Below median for more than 20%; Falls in FY25
• Weighted average land lease expiry: Above median for more than 20%

Debt Profile

• Gearing ratio: Below median for more than 10%
• Cost of debt: Below median for more than 10%
• Fixed rate debt %: ± 10% from median
• Unsecured debt %: Above median for more than 10%
• WADM: ± 10% from median
• Highest debt maturity within 5 years: Below median for more than 10%; Falls in FY25
• Interest coverage ratio: Above median for more than 20%

Diversification Profile

• Top geographical contribution: Below median for more than 20%
• Top property contribution: Below median for more than 20%
• Top 5 properties' contribution: Below median for more than 20%
• Top tenant contribution: Below median for more than 20%
• Top 10 tenants' contribution: Below median for more than 20%

Key Financial Metrics

• Property yield: ± 10% from median
• Management fees over distribution: ± 10% from median; $6.62 distribution for every dollar paid 
• Distribution on capital: ± 10% from median
• Distribution margin: Above median for more than 20%

Trends

Let's compare only for the period after the merger with Frasers Commercial Trust in 2Q 2020.

• Uptrend: NAV per Unit, Interest Coverage Ratio,
• Slight Uptrend: DPU
• Flat: Distribution Margin
• Slight Downtrend: Property Yield, Distribution on Capital

Relative Valuation

• P/NAV: Below -1SD for 1y, 3y & 5y
• Dividend Yield: Above +2SD for 1y; Average for 3y & 5y

Author's Opinion

Favorable	Less Favorable
Diversified Sector	Low REIT Sponsor's Shareholding
High Directors of REIT Manager's Shareholding	Low REIT Manager's Shareholding
Long WALE
Well Spread Lease Expiry
Long Weighted Average Land Lease Expiry
Low Gearing Ratio
Low Cost of Debt
High Unsecured Debt %
Well Spread Debt Maturity
High Interest Coverage Ratio
Low Top Geographical Contribution
Low Top Property & Top 5 Properties Contributions
Low Top Tenant & Top 10 Tenants Contributions
High Distribution Margin
NAV per Unit Uptrend
Interest Coverage Ratio Uptrend

FLCT performance remains resilient despite some slight decline as compared to the previous half-yearly performance. Following the repayment of debt in April, the gearing ratio has reduced to 29.5%, with fixed-rate borrowing increased to 82.6% and WADM extended to 3.1 years. From the presentation, FLCT’s assets and operations in Europe have largely remained unaffected and management expects the operating environment to be improved in view of the strong tenant activity observed. 

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SREITs Dashboard - Detailed information on individual Singapore REIT

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REIT Analysis - List of previous REIT analysis posts

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*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions and loss or damage due to the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.