SINGAPORE (Jan 29): Analysts are keeping their positive stance on Frasers Logistics & Industrial Trust (FLT) on the back of a robust pipeline of potential acquisition targets from its sponsor.
“We note that FLT has the right of first refusal (ROFR) to its sponsor’s development pipeline, which currently includes 16 assets in Australia and 25 assets in Europe,” says CIMB Research’s lead analyst Yeo Zhi Bin in a report on Friday.
“Hence, we believe FLT has good options to consider where to best deploy its capital,” he adds.
CIMB is keeping its “add” call on FLT with a higher target price at $1.24, from $1.20 previously.
“With ample financial capacity to take on acquisitions coupled with a visible pipeline, we believe that FLT will remain on an acquisition path in 2018,” says DBS Group Research’s lead analyst Derek Tan in a Monday report.
With FLT’s gearing remaining at 30.9%, Tan estimates that FLT has a significant debt headroom of A$508 million ($538 million) to fund growth initiatives.
In addition, he notes that some 68% of FLT’s borrowings are fixed, which mitigates volatility from potential fluctuations in borrowing costs.
“With an under-geared balance sheet, FLT has the ability to surprise on the upside through acquisitions, which we believe is not included in consensus’ estimates,” Tan says.
DBS is keeping its “buy” call on FLT with a higher target price of $1.24, from $1.18 previously.
Meanwhile, OCBC Investment Research notes that FLT manager had opted to take 78.1% of its management fees in units in 1Q18, compared to 100% in a year ago.
“We believe this is a prudent approach to limit the impact of longer-term dilution to unitholders,” says OCBC’s lead analyst Andy Wong Teck Ching in a Monday report.
OCBC is keeping its “buy” recommendation on FLT with an unchanged fair value estimate of $1.25.
The positive outlook on FLT comes following a 3.4% increase in DPU to 1.8 cents for 1Q18, from 1.74 cents a year ago.
The improvement was aided by a higher currency hedge rate of A$1 to $1.0583, compared to A$1 to $1 a year ago.
Revenue grew 6.9% to A$4.24 million, while net property income (NPI) came in 4.3% higher at A$34.8 million.
See: Fraser Logistics & Industrial Trust 1Q DPU up 3.4% to 1.8 cents on forex gains
As at 4.41pm, units of FLT are trading 1 cent higher at $1.16. According to DBS forecasts and valuations, this implies a price-to-earnings ratio of 16.9 times and a distribution yield of 6.7% for FY18.
