Analysts from CGS-CIMB Research and UOB Kay Hian have maintained their “add” and “buy” calls on ARA LOGOS Logistics Trust (ALOG), as the trust’s results for the 1QFY2021 stood in line with their expectations.
ALOG, on April 23, reported distribution per unit (DPU) of 1.353 cents for the 1QFY2021 ended March, 35.7% higher y-o-y.
The stronger y-o-y results were mainly due to the commencement of new leases as well as the higher revenue generated from ALOG’s Australian portfolio on the back of the stronger AUD.
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In addition to their “add” call, CGS-CIMB analysts Eing Kar Mei and Lock Mun Yee have upped their target price on ALOG to 81.4 cents from 74.9 cents previously as they deem the ongoing e-commerce demand to continue to boost demand for warehouse logistics assets.
ALOG’s portfolio occupancy improved further by 0.6 percentage points q-o-q to 99.1% in 1QFY2021. The REIT also continued to deliver positive rental reversion of 0.9% during the quarter.
We maintain our FY2021-2023F DPU but raise our dividend discount model (DDM)-based target price to 81 cents as we reduce our cost of equity (COE) assumption from 7.7% to 7.4%,” write Eing and Lock.
“We now see ALOG as a more diversified REIT with stronger growth prospects with LOGOS onboard as a sponsor. The acquisition of LP Property from its sponsor, LOGOS has been completed on April 21. This will reduce ALOG’s assets under management (AUM) exposure in Singapore from 65% to 50% with the remaining exposure in Australia.”
“The stock offers attractive dividend yield of 7%. Rerating catalysts/downside risks include accretive acquisitions/weaker-than-expected rental reversion,” they add.
DBS analysts Dale Lai and Derek Tan have also raised their target price estimate to 85 cents from 80 cents previously in anticipation of a yield compression given its higher-than-peer yields backed by its “resilient” pure-play logistics portfolio.
The REIT’s logistics portfolio has reported a “robust” occupancy rate while reversions stayed positive with potential upside.
“The manager is also moving into a virtuous growth cycle in our view, supported by a significant acquisition pipeline from its sponsor while actively reconstituting its portfolio to sharpen its focus,” write Lai and Tan.
In addition, the analysts believe ALOG can leverage on its sponsor’s network and grow in key logistics huvs while selectively divesting non-core assets.
“In the medium term, the REIT may also look to increase its stakes in the New LAIVS and OP Funds for inorganic growth,” they add. “We are excited that LOGOS brings about a new paradigm for ALOG to grow into with over $9.4 billion pipeline. In addition, ALOG can also ride on the strategic partnership with Yang Kee Logistics in Singapore as it harnesses the longer-term structural e-commerce growth trends in Asia.”
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Meanwhile, UOB Kay Hian analyst Jonathan Koh has pegged ALOG’s target price estimate at 89 cents.
In his report, Koh sees ALOG as having “sustainable growth and transformation by tapping on its sponsor’s pipeline”.
“With LOGOS installed as its new sponsor, ALOG has access to a sizeable acquisition pipeline with an AUM of US$10.2 billion ($13.53 billion), of which more than half is located in Singapore, Australia and China.”
On that, Koh adds that ALOG is a “laggard with [an] attractive distribution yield” of 6.7% and yield spread of 5.1% for FY2022.
Furthermore, ALOG “trades at price-to-net asset value (P/NAV) of 1.34 times compared with peers’ 1.43 times (Frasers Logistics Trust: 1.34 times, Mapletree Logistics Trust: 1.52 times)”.
As at 4.26pm, units in ALOG are trading 1 cent higher or 1.3% up at 77.5 cents.
