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Frasers Logistics and Industrial Trust Reports Slight Distribution Growth In Latest Earnings Update

On the evening of 5 November 2018, Frasers Logistics and Industrial Trust (SGX: BUOU) reported its fourth quarter and full year earnings update for its fiscal year ended 30 September 2018 (FY2018). As a quick introduction, Frasers Logistics and Industrial Trust is a REIT that focuses on logistics and industrial properties. Its portfolio, which currently has a value of over A$3.0 billion, consists of 83 properties in Australia, Germany, and the Netherlands.

Let’s take a quick look at the important points about Frasers Logistics and Industrial Trust’s latest results for the fourth quarter of FY2018:

1. Gross revenue for the reporting quarter increased by 43.2% year-on-year to A$60.44 million, and adjusted net property income followed suit, rising by 52.6% to A$49.31 million. The steep increase in both financial numbers were due to new contributions from 21 properties in Germany and the Netherlands which were acquired in May 2018, and the acquisition of two prime grade properties in Australia in September 2018.

2. Underpinned by the growth in revenue and net property income, Frasers Logistics and Industrial Trust’s distributable income increased by 35.6% to A$35.96 million over the same period; investors should note that this includes a distribution of A$2.0 million from divestment gains. In all, there was a slight 0.6% increase in distribution per unit (DPU) to 1.78 Singapore cents. The much lower rate of growth in the REIT’s DPU is due to an increase in the number of the REIT’s units compared to a year ago; over the past year, Frasers Logistics and Industrial Trust had used units of itself as currency to make acquisitions, and also undertook a preferential offering.

3. As of 30 September 2018, Frasers Logistics and Industrial Trust’s gearing stood at 34.6%, which is at a comfortable distance from the regulatory gearing limit of 45%. The REIT’s weighted average interest rate came in at 2.5% per year, and it had an average debt maturity of 2.9 years. The interest cover was 7.1, and the REIT also reported that 82.0% of its loans were on fixed rates – the low proportion of floating-rate debt mitigates risk from interest rate hikes.

4. Frasers Logistics and Industrial Trust reported a portfolio occupancy rate of 99.6% at the end of the reporting quarter, and a weighted average lease expiry by gross income of 6.87 years.  The REIT only has 2.5% of its leases up for renewal in FY2019. Frasers Logistics and Industrial Trust also reported that it had signed two leases in Australia that are on 10-year lease terms.

5. Frasers Logistics and Industrial Trust’s net asset value came in at S$0.94 per unit, unchanged from a year ago.

6. In Frasers Logistics and Industrial Trust’s latest earnings update, the CEO of the REIT’s manager, Robert Wallace, gave some useful comments on the REIT’s outlook:

“The fundamentals for our key markets of Australia, Germany, and the Netherlands are expected to remain positive, underpinned by healthy economic data and a burgeoning e-commerce sector, which has driven demand for industrial and logistics properties. For Australia, high levels of public infrastructure spending, population, and consumption growth will continue to drive demand for industrial and logistics space. The German and Dutch markets are similarly in an upswing with a growing demand for industrial and logistics space set against a backdrop of limited supply.”

Frasers Logistics and Industrial Trust’s unit price is currently at S$1.04, which gives the REIT a price-to-book ratio of 1.11, and a trailing distribution yield of 6.9%.

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The Motley Fool Singapore contributor Esjay contributed to this article. Esjay does not own shares in any companies mentioned. The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore writer Chong Ser Jing does not own shares in any companies mentioned.