ESR-LOGOS REIT Review @ 1 November 2022

Basic Profile & Key Statistics

• Main Sector(s): Logistics, Industrial & Office
• Country(s) with Assets: Singapore & Australia
  
• No. of Properties (exclude development/associate/fund): 82

Key Indicators

Performance Highlight

Gross revenue and NPI have improved yoy due to the merger with ARA LOGOS Logistics Trust in April this year.

Rental Reversion

Rental reversion is at 11.4% for both 3Q 2022 and YTD 3Q 2022. 

Acquisition

The acquisition of ESR Sakura DC has completed on 31 October 2022.

Divestment

E-LOG divested 3 Sanitarium Drive on 22 Jul. The divestment of 49 Pandan Road and 2 Jalan Kilang Barat is expected to complete by this year-end.

Development & Asset Enhancement Initiatives

The development of 21B Senoko Loop is expected to be completed in 1Q 2024. The AEI for 7002 AMK Ave 5 and 16 Tai Seng St is expected to be completed by 3Q 2023 and 1Q 2024 respectively. 53 Peregrine Dr has completed the AEI work and has started to contribute income starting 25 October.

Related Parties Shareholding

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

Lease Profile

• Occupancy: ± 5% from median
• WALE: Below median for more than 10%
• Highest lease expiry within 5 years: ± 10% from median; Falls in 2023
• Weighted average land lease expiry: Below median for more than 20%

Debt Profile

• Gearing ratio: ± 10% from median
• Gearing ratio including perps: Above median for more than 10%
• Cost of debt: Above median for more than 20%
• Fixed rate debt %: Below median for more than 10%
• Unsecured debt %: 100%
• WADM: ± 10% from median
• Highest debt maturity within 5 years: ± 10% from median; Falls in 2027
• Interest coverage ratio: Below median for more than 20%

Diversification Profile

• Top geographical contribution: Above 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: Below median for more than 10%; $7.81 distribution for every dollar paid 
• Distribution on capital: Above median for more than 10%
• Distribution margin: ± 10% from median

Trends

As the merger with ARA LOGS Logistics Trust was only completed recently in 2Q 2022, therefore I would review the period from 4Q 2018 when ESR-REIT and Viva Industrial Trust merger was completed.

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

ICR for the periods 3Q2020 and before (besides 4Q 2019) are estimated to reflect a closer figure to MAS ICR.

Relative Valuation

• Current 52 Weeks Range: 14.3%
• P/NAV: Below -2SD for 1y; Below average for 3y & 5y
• Dividend Yield: Above +2SD for 1y; Above average for 3y; Above +1SD & 5y

Author's Opinion

Favorable	Less Favorable
Diversified Sector	Low REIT Sponsor's Shareholding
High REIT Manager's Shareholding	Low Directors of REIT Manager's Shareholding
100% Unsecured Debt	High Perpetual Securities %
Low Top Property & Top 5 Properties Contributions	High Cost of Debt
Low Top Tenant & Top 10 Tenants Contributions	Low Fixed Rate Debt %
Competitive Management Fees	Low Interest Coverage Ratio
High Distribution on Capital	High Top Geographical Contribution
Interest Coverage Ratio Uptrend	DPU Downtrend
Distribution Margin Uptrend	NAV per Unit Downtrend
	Property Yield Downtrend
	Distribution on Capital Downtend

Gross revenue and NPI have increased due to the merger with ARA LOGOS Logistics Trust. If we are taking 70% of NPI (average of past 1 year) as distributable income, then the DPU would be 0.73 cents (assuming 100% distribution), very similar to the pre-merger period from 2Q 2021 onwards. E-LOG has performed quite some numbers of capital recycling and AEIs lately even before the merger, let's see whether all these could improve the DPU back to pre-covid level moving forward.

You could also refer below for more information:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and Detail of Singapore REIT

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 as a result of 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.