Analysts at DBS Group Research (DBS) and CGS-CIMB Research remain positive on Frasers Logistics and Commercial Trust (FLCT) BUOU amid strong positive rental reversions, income contribution from completed development projects and stable occupancy rates in 1HFY2023 ended March 31.
Both DBS analysts Dale Lai and Derek Tan and CGS-CIMB analysts Lock Mun Yee and Natalie Ong have maintained their “buy” and “add” calls. DBS’s Lai and Tan have kept their target price of $1.55 while CGS-CIMB’s Lock and Ong have upped their target price to $1.52 from $1.38 previously.
The analysts all note a positive rental reversion across FLCT’s lease expiries in 2QFY2023.
Lai and Derek from DBS note that this comes mainly from the Logistics & Industrial (L&I) portfolio in Australia (+23.6%) and Germany (+24.3%), with a total of 14 leases renewed.
The occupancy rate of FLCT also remained stable at 95.9% (flat q-o-q), with only 3.4% of portfolio leases due to expire in 2H2023. Of which, 2.3% are from its commercial portfolio in the UK, Australia and Singapore, and 1.1% from its L&I portfolio in Australia and Europe, according to Lai and Tan.
Lock and Ong from CGS-CIMB note that in 1HFY2023, FLCT completed the development of two L&I properties in Blythe Valley Park and Worcester, which they believe should bolster earnings from FY2024.
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The analysts also all noted that FLCT has remained one of the lowest geared among S-REITs, standing at 27.8% as at end 1HFY2023.
“It's all-in cost of borrowings rose to 1.8% in 1H2023 from 1.7% in 1QFY2023. About 76.2% of its debt is at fixed rates. FLCT has also commenced discussions with banks on refinancing options for its loans maturing in FY2024. While the rising interest rate environment has resulted in a slower transaction market, we believe FLCT is well positioned to tap into inorganic growth,” says Lock and Ong in their May 4 report.
Finally, the analysts all note that FLCT had a distribution per unit (DPU) of 3.52 cents, falling in line with their projections of 48.8% for CGS-CIMB and 49% for DBS, for their 1HFY2023 estimates.
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According to Lock and Ong, FLCT’s 1HFY2023 ending in September revenue fell 11.7%/14% y-o-y to $208 million/$157.9 million, due to absence of income from Cross St Exchange and weaker australian dollar, euro and pound against the Sing dollar.
“Distribution income fell a slower 8% y-o-y, thanks to $9.6 million of capital distributions during the period,” says Lock and Ong.
As at 1.29pm, shares in FLCT are trading one cent lower or at 0.74% down at $1.35.
