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A Great Start to 2018 for Frasers Logistics and Industrial Trust

Frasers Logistics and Industrial Trust (SGX:BUOU) is a Singapore-listed REIT that invests in industrial and logistics real estate. As of 31 March 2018, the REIT had a portfolio of 61 properties, all of which are located in Australia.

Recently, Frasers Logistics and Industrial Trust released results for its second quarter of its financial year 17/18. Here are some of the key takeaways from its earnings update.

1. For the quarter, which ended on 31 March 2018, gross revenue increased 6.4% to A$43.6 million from A$40.9 million a year ago. Adjusted net property income, likewise, grew 8.1% year-on-year to A$33.4 million from A$30.9 million.

2. Distributable income to unitholders increased 3.2% to A$25.9 million from A$25.1 million. Consequently, distribution per unit grew 3.4% to 1.81 Singapore cents from 1.75 Singapore cents a year ago.

3. The increase in revenue and net property income was largely driven by contribution from new acquisitions and completion of development and asset enhancements of two of its properties.

4. As per the REIT’s announcement on its distribution policy earlier, Frasers Logistics and Industrial Trust will distribute at least 90% of its distributable income, starting from this quarter. Distributions above 90% will be made on the manager’s discretion. It previously had a policy of distributing 100% of its distributable income since its listing on 20 June 2016.

5. As of 31 March 2018, the value of its investment properties was A$1.93 billion, a 1.3% increase from 30 September 2017 of A$1.91 billion. This was due to the completion of developmental works and an asset enhancement initiative. As a result, the value of its total assets rose A$40 million or 2% to A$1.93 billion. Net asset value per (NAV) unit rose 2.2% to A$0.90 from A$0.88 on 30 September 2017. However, in Singapore dollars, the NAV per unit decreased to S$0.91 from S$0.94 due to a stronger Singapore dollar.

6. As of the end of the quarter, the group had an aggregate leverage of 30.5%. This is well below the 45% regulatory cap, and the gearing one of the lowest among REITs in Singapore. This gives it additional debt headroom of A$531 million. It had a weighted average cost of borrowing of 2.9% per annum, a comfortable interest coverage ratio of 7.8 times and a weighted average debt maturity of 2.6 years.

7. During the quarter, the REIT extended two leases and acquired one new tenant for a negative rental reversion rate of 7.3%. However, as per its other leases, the new leases had built-in rental escalations of between 3.15% and 3.25%.

8. As of 31 March 2018, the REIT achieved a high occupancy rate of 99.4% and had a very long weighted average lease expiry profile of 6.75 years, with an average fixed annual rental increment of 3.1%.

9. On the overall performance of the Australian industrial market, the REIT’s manager said that Australian industrial supply is above the average with robust additions of over 450,000 square meters in the first quarter of 2018. However, take-up levels have also been strong, at 18% above the 10-year average, which has driven rental growth in Sydney and Melbourne’s South East.

10. In April, the REIT also proposed the acquisition of 17 properties in Germany and four properties in the Netherlands worth a total of 603.9 million euros. It has proposed to fund the acquisition through a mix of debt and additional capital from equity fundraising.

At the time of writing, units of Frasers Logistics and Industrial Trust exchanged hands at S$1.03. This translates to a price-to-book ratio of 1.1 and an annualised distribution yield of 7.0%.

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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 Jeremy Chia owns units of Frasers Logistics and Industrial Trust.