Frasers Logistics and Industrial Trust’s Latest Earnings: Acquisitions Boost Distribution Per Unit

Frasers Logistics and Industrial Trust (SGX: BUOU), which owns a portfolio of 61 properties in Australia and 21 in Europe, recently announced its results for the April to June period (the third quarter of its financial year). Here are the important takeaways from its earnings update:

1. Gross revenue was A$49.3 million, up A$9.1 million or 22.6% from the corresponding period last year. Adjusted net property income (NPI) rose 27.4% to A$39.3 million from A$30.8 million.

2. The higher NPI was driven by the contributions from acquisitions and annual fixed rental escalation. The new acquisitions (seven properties acquired in 2017 and 21 in May 2018) contributed A$7.4 million.

3. Distributable income rose 22.4% to A$30.7 million from A$25.0 million. Distribution per unit rose 2.9% to 1.80 Singapore cents.

4. Below is a summary of the latest results:

Source: Frasers Logistics and Industrial Trust FY18 Q3 Earnings Presentation

5. During the quarter, the trust completed the acquisition of 21 properties in Europe. It was funded by a mix of debt and funds raised through private and preferential offering. Here’s a breakdown of the properties by portfolio value.

Source: Frasers Logistics and Industrial Trust FY18 Q3 Earnings Presentation

6. As of 30 June, the trust had A$1.08 million in gross borrowings and total assets valued at A$2.98 million, giving it a gearing of 36.3%. Interest coverage ratio was 6.4 times and 81% of borrowings were on fixed rate.

7. The net asset value (NAV) was S$0.92 at the end of the quarter, down from S$0.94 recorded nine months ago. However, this was largely due to strengthening of the Singapore dollar against the Australian dollar. In constant currency terms, NAV per unit would have been A$0.91, compared to A$0.88 nine months ago.

8. The trust had a high portfolio occupancy rate of 99.3% and a weighted average lease expiry (WALE) of 7.01 years. Its Australia portfolio had an averaged fixed annual rental increment of 3.1%, while its properties in Europe have a inflation-linked increment. This gives it visible organic income growth in the future.

9. In addition to its long WALE, it seems that the trust has a well-staggered lease expiry profile, with only 0.1% of leases due for renewal in the next quarter and 3.4% due in the next financial year.

10. On 3 July, the trust announced the proposed sale of a non-core property in Australia for A$90.5 million, a 40.3% premium to book value.

11. The REIT’s manager gave an update on Australia and Europe’s leasing market. For Australia, it said:

“The leasing market has been robust with national take-up level 13% above the 10-year average over the past 12 months. Third party logistics and consumer sectors have been leading demand nationally with the online retailing becoming more significant… In addition, land values have been rising across the major cities, driven by the demand-led expansion in development activity and rezoning of land in the inner submarkets of Sydney and Melbourne.”

For Germany, it said:

“The German industrial and logistics market remains underpinned by increasing demand, including growth in e-commerce and a favourable economic environment. New industrial supply remains limited, with prime rents stable in most markets”.

At the time of writing, units of Frasers Logistics and Industrial Trust traded at S$1.05 per piece, giving it a price-to-book ratio of 1.2 and a distribution yield of 6.3%.

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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 doesn’t own units in Frasers Logistics and Industrial Trust