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CGS-CIMB positive on FLCT’s acquisition of Europe properties but leaves TP unchanged for now pending completion

Atiqah Mokhtar
Atiqah Mokhtar5/25/2021 02:54 PM GMT+08  • 2 min read
CGS-CIMB positive on FLCT’s acquisition of Europe properties but leaves TP unchanged for now pending completion
CGS-CIMB has kept its ‘add’ rating for FLCT with an unchanged target price of $1.57.
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CGS-CIMB analysts Lock Mun Yee and Eing Kar Mei are upbeat on Frasers Logistics & Commercial Trust’s (FLCT) recently announced acquisition of six properties in Europe.

See: FLCT acquires six properties in Europe and UK for $549 mil, launches private placement to raise $300 mil

The six properties include four being purchased from its sponsor, Frasers Property, while the remaining two are being purchased from third parties, for a total of $548.7 million.

The analysts note that the portfolio, encompassing a total net lettable area of 123,328 square metres, is 97.4% occupied with a weighted average lease to expiry (WALE) of 9.1 years. They also point out that the UK properties come with a 24-month rental guarantee of GBP3.9 million (7.3 million) for existing vacant spaces.

Lock and Eing point out that the acquisition will enable FLCT to further capitalise on the robust European logistics sector. “Moreover, purchase of the UK properties, Blythe Valley Park (BVP) and Connexion, also marks the trust’s entry into the UK logistics segment. BVP is an integrated logistics and business park with an established and well-connected mixed-use campus for the new economy sectors,” they write in a May 24 research note.

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Post-acquisition, FLCT’s portfolio will comprise 58% of logistics and industrial assets, while portfolio occupancy will be 96.8% with a WALE of 5 years.

They also highlight that the acquisitions will be distribution per unit (DPU) and net asset value (NAV) accretive. “Based on an initial net property income (NPI) yield of 5.2%, the acquisitions are DPU (+1.8% on a proforma basis) and NAV (+0.9% on a proforma basis) accretive,” they note.

They also estimate that FLCT’s gearing will remain low at 36.2% post-acquisition, which is being financed by debt as well as a private placement to raise a maximum of $335.8 million.

See: FLCT raises $335.8 mil from private placement with issue price at top end of range

To that end, the analysts reiterate their ‘add’ rating for the stock with an unchanged target price of $1.57. “We leave our FY2021-2023 DPU estimates unchanged pending the completion of the deal and private placement exercise,” they explain.

Lock and Eing continue to like FLCT’s visible inorganic growth potential and income resilience, backed by a long WALE.

As at 2.11pm, units in FLCT are down 1 cent or 0.69% lower at $1.43.

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