Frasers Logistics a ‘buy’ on clearer funding structure for acquisitions

(See also: Frasers Logistics Trust's private placement 4.6 times subscribed)

This represents a discount of 2.9% against its last closing price of $1.04 prior to the announcement and translates into gross proceeds of $78.8 million and net proceeds of $77.2 million.

Besides being 4.6 times subscribed, the final issue price also comes in at the top end of the indicative range of $0.985–$1.01, which reflects the strong sentiment in the market and confidence in FLT’s prospects.

In a Thursday report, analyst Andy Wong Teck Chin says this private placement does not come as a surprise, as FLT had previously indicated that it may fund its proposed acquisition of a portfolio of seven industrial properties in Australia from its sponsor for an estimated total cost of A$179.6 million ($190 million) using a combination of debt and equity.

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To recap, the initial NPI yield of the proposed portfolio acquisition is estimated to be 6.4% (6.8% for the completed properties and 6.1% for the development properties).

The properties are fully occupied and have a long WALE of 9.6 years, which is higher than FLT’s existing portfolio WALE of 6.7 years. There are also built-in annual rent escalations of 3.1% embedded in the portfolio leases.

OCBC’s FY17 NPI forecast is raised by 1.2% while FY18 NPI and DPU forecasts are raised by 7.7% and 1.2% respectively.

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“Maintain ‘buy’ on FLT, with a revised fair value estimate of $1.14 from $1.12. FLT remains as one of our top picks within the S-REITs sector, offering FY17F distribution yield of 6.5%,” says Wong.

Shares in FLT are trading 0.01 cent higher at $1.065.