SINGAPORE (May 9): Frasers Logistics & Industrial Trust’s (FLT) 2QFY18 results came in within the expectations of OCBC Investment Research.
Gross revenue rose 6.4% y-o-y to A$43.6 million ($43.5 million) while NPI grew 3.3% to A$35.7 million, driven largely by the acquisitions of four completed properties in FY17 and contribution from two development assets last year.
DPU in AUD terms declined 2.9% y-o-y to 1.70 A cents as only 67.5% of management fees were taken in units in 2Q18, versus 100% in 2Q17. If 100% of the fees were taken in units instead, 2Q18 DPU would have grown 1.1% y-o-y to 1.77 A cents.
In SGD terms, due to a currency hedge rate of A$1: $1.0647 which FLT had earlier entered into, DPU grew 3.4% y-o-y to 1.81 cents.
For 1H18, FLT’s gross revenue and DPU improved 6.7% and 3.4% to A$86.0 million and 3.61 cents, forming 49.1% and 50.3% of OCBC’s FY18 forecasts, respectively.
In 2Q18, FLT’s manager managed to renew or sign three leases, says OCBC. Although rental reversions were negative at 7.3%, the three leases carry annual rent increments of 3.15%-3.25%, while two of the leases have long tenure of 7.1 and 10 years, thus providing visibility.
Occupancy continues to be high at 99.4%, while WALE is healthy at 6.75 years. As at March 31, FLT’s balance sheet remains strong, with a gearing ratio of 30.5%.
As FLT has a policy of hedging its forex on a rolling six months basis, OCBC believes its currency hedge rates for its 2H18 distributions are likely to come in lower than its 1HFY18 hedges.
“We now incorporate a weaker AUD-SGD assumption in our model (FY19-FY22: A$1: $1.01). Correspondingly, our fair value declines to $1.21 from $1.25,” says analyst Andy Wong Teck Ching in Wednesday report.
Units in FLT are up 1 cent at $1.03 or 14.3 times FY18 DPU of 7.2 cents.
