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3 Things Frasers Logistics and Industrial Trust’s Management Wants Investors To Know About Its Business

In late January, Frasers Logistics and Industrial Trust (SGX: BUOU) released its first quarter earnings update for its fiscal year ending 30 September 2018 (FY2018).

As a quick introduction, Frasers Logistics and Industrial Trust is a REIT that currently owns 61 industrial and logistics properties in Australia. Its assets are concentrated within major industrial markets in the country, which include Melbourne, Sydney, and Brisbane.

The Manager of the REIT had given a presentation on the trust’s latest results. In the presentation deck, I saw three slides about its business that I think investors should pay attention to.

The first slide shows a high-level summary of Frasers Logistics and Industrial Trust’s income statement for the first quarter of FY2018:


Source: Frasers Logistics and Industrial Trust FY2018 first quarter earnings presentation

We can see that the REIT had a good quarter, with growth in revenue, net property income, distributable income, and distribution per unit (in Singapore dollar terms). Frasers Logistics and Industrial Trust attributed its performance to contributions from four new acquisitions, and the completion of new facilities. The REIT’s portfolio occupancy rate stood at 99.4% as of 31 December 2017.

The next slide I want to look at shows the REIT’s lease expiry profile:


Source: Frasers Logistics and Industrial Trust FY2018 first quarter earnings presentation

It is important to look at a REIT’s lease expiry profile since it can give us clues on the sustainability of the REIT’s rental income. In general, a long lease expiry profile is preferred over a short one.

What’s useful to note about Frasers Logistics and Industrial Trust’s lease expiry profile is that its leases will expire in a staggered manner, and it has a long WALE (weighted average lease to expiry) of 6.79 years as of 31 December 2017. These traits provide good earnings visibility for the REIT over the next few years.

The last slide I want to discuss shows Frasers Logistics and Industrial Trust’s tenant profile:


Source: Frasers Logistics and Industrial Trust FY2018 first quarter earnings presentation

A REIT’s tenant profile is also useful in helping investors ascertain how sustainable the REIT’s rental income is. Ideally, a REIT should be diversifying its rental income across many different tenants and industries to avoid concentration risk.

From the chart above, we can see that the top 10 tenants of Frasers Logistics and Industrial Trust accounted for 41.5% of the REIT’s gross rental income for the month of December 2017. This seems like a reasonable level of diversification to me. Furthermore, the REIT’s income is also diversified across four areas, namely consumer, logistics, manufacturing, and others.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.