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Frasers Logistics & Industrial Trust’s Latest Earnings: DPU Impacted By Falling Currency

Yesterday evening, Frasers Logistics & Industrial Trust (SGX: BUOU) released its first quarter earnings update for its financial year ending 30 September 2019 (FY2019). Frasers Logistics & Industrial Trust, or FLT, is a Singapore-listed REIT which owns industrial properties in Australia, Germany, and the Netherlands. The REIT’s sponsor is Frasers Property Limited (SGX: TQ5).

Below are nine important points to note from FLT’s latest results:

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1. Revenue for the reporting quarter rose 40.3% year on year to A$59.5 million while adjusted net property income increased by 46.5%. This was due to contributions from two acquisitions in Europe and Australia in FY2018 and one acquisition in the Netherlands in the reporting quarter.

2. Borrowing costs were 57.5% higher, however, as a result of additional borrowings taken up to finance the above-mentioned acquisitions. As a result, the REIT’s distributable income to unitholders increased by a lower rate of 41.9% to A$36.7 million from A$25.9 million a year ago.

3. FLT’s distribution per unit (DPU) was 1.81 Australian cents in the reporting quarter, up 6.5% year on year. However, due to the Australian dollar weakening against the Singapore dollar, the REIT’s DPU in Singapore-dollar terms declined by 1.1% from 1.80 Singapore cents a year ago to 1.78 Singapore cents for the reporting quarter.

4. The REIT’s annualised DPU (based on 1.78 Singapore cents in FY2019’s first quarter) comes up to 7.12 Singapore cents. FLT’s unit price closed at S$1.08 yesterday, which gives rise to an annualized forward dividend yield of 6.6%.

5. FLT’s portfolio consists of 83 properties with a portfolio value of A$3 billion as of 31 December 2018. The gross lettable area is 1.98 million square metres, of which 1.33 million (67%) is from Australia while the remainder (33%) is from Europe.

6. The portfolio has a weighted average lease expiry (WALE) of 6.71 years, and the occupancy rate is 99.6%. Only 2% of the leased area will be up for renewal by the end of FY2019.

7. The aggregate leverage for the REIT stands at 35.6%, with debt headroom of A$534 million before the regulatory gearing-threshold of 45% is reached. The REIT’s weighted average cost of borrowing is lower at 2.4% versus 2.8% a year ago. 79% of FLT’s debt is on fixed interest rates, which helps to mitigate the impact of rising interest rates.

8. Two leases were renewed in the first quarter of FY2019 in Victoria, Australia, with fixed annual escalation clauses of 3% to 3.5%.

9. Robert Wallace, the chief executive officer of the REIT’s Manager, expressed confidence in the REIT’s fundamentals but remains watchful of global trade tensions which have depressed the Australian Dollar. This is what he said:-

“We commenced FY2019 with an acquisition of a modern freehold logistics facility in the Netherlands, and delivered a 41.9% year-on-year increase to distributable income for 1QFY19. The prime logistics sector across our key markets remains well-supported by investments in infrastructure and a burgeoning e-commerce market. We also remain watchful of the ongoing trade tensions which have weighed down the Australian Dollar.”

FLT’s DPU in FY2019’s first quarter was hit by a weakening Australian dollar, which is hitting multi-year lows against the Singapore dollar. However, the REIT’s property portfolio still remains resilient and with a gearing level of 35.6%, there is still ample room for the REIT to borrow to fund potential acquisitions. The forward yield of 6.6% remains attractive as the REIT is well-diversified among three countries and most of its land tenure is freehold.

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The Motley Fool Singapore contributor Royston Yang contributed to this article. Royston owns units in Frasers Logistics & Industrial Trust. 

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. The Motley Fool Singapore does not own shares in any companies mentioned.