Analysts from CGS-CIMB Research and OCBC Investment Research have maintained “add” on Frasers Logistics & Commercial Trust (FLCT) after the REIT posted its updates for the 3QFY2021 on Aug 4.
CGS-CIMB analysts Lock Mun Yee and Eing Kar Mei have upped their target price to $1.62 from $1.57 amid the REIT’s “stable operating and financial metrics” during the quarter.
FLCT posted an overall portfolio occupancy of 96.3%, 0.5 percentage points lower q-o-q due to a slight slip in its commercial portfolio.
The REIT’s industrial and logistics portfolio remained fully occupied.
Gearing stood at a healthy 36.4% with interest coverage ratio at 7 times, as at end-3QFY2021.
The REIT has a further debt headroom of $1.9 billion to tap into inorganic growth opportunities, note Lock and Eing.
The analysts have also factored in FLCT’s contributions from its new acquisitions in the UK and Europe that were completed in June, leading to higher distribution per unit (DPU) estimates of 0.05% to 2.78% for the FY2021 to FY2023.
“We continue to like FLCT’s visible inorganic growth potential and income resilience, backed by a long weighted average lease expiry (WALE),” write the analysts in an Aug 5 report.
Accretive new acquisitions are a potential re-rating catalyst while a drag from retail operations, as well as volatility from the Australian dollar and Euro are downside risks.
The research team at OCBC has, on the other hand, lowered its fair value estimate on FLCT to $1.60 from $1.62 due to a slight environmental, social and governance (ESG) discount.
In its ESG update, the team, in an Aug 6 report, says the REIT has improved in its human capital development programmes. It also falls into the highest scoring range for the ‘Corporate Governance’ category compared to that of its peers around the world.
“The ratio of green-certified properties in its portfolio remains above the global average,” adds the team. “We note that FLCT’s industrial portfolio was named Global Sector Leader (Listed Industrial) for the third consecutive year in the 2020 GRESB Assessment, which is one of the global ESG benchmarks for real estate.”
That said, it has raised its DPU forecasts for the FY2021 and Fy2022 by 0.9% and 1.7% respectively on account of FLCT’s recent acquisitions.
To the team, one of the REIT’s merits is its defensive profile due to its high occupancy rate, long WALE and manageable lease expiries for the rest of the FY2021 and FY2022.
Units in FLCT closed 2 cents lower or 1.3% down at $1.51 on Aug 11, or 1.37 times P/B with a dividend yield of 5.27% for the FY2021, according to CGS-CIMB’s estimates.