SINGAPORE (Nov 8): CGS-CIMB Securities is maintaining Frasers Logistics & Industrial Trust (FLT) at “buy” after FY18 DPU came in at 7.19 cents, 2.6% above FY17 and forming 100% of its FY18 forecast.

4Q18 DPU of 1.78 cents was 0.6% higher y-o-y due to inorganic contributions from new acquisitions in Europe and Australia, inbuilt rental escalations as well as a distribution of a A$2 million ($2 million) divestment gain, partly offset by an enlarged unit base after a rights issue and a weaker hedge rate of A$1:$1.0011.

FLT also revalued its portfolio up by 1.9% y-o-y, translating into a book value of A$0.95/unit.

See: Frasers Logistics Trust reports 0.6% higher 4Q DPU of 1.78 cents, uplifted by completed acquisitions

Portfolio occupancy held steady q-o-q at 99.6% with a WALE of 6.87 years. FLT renewed 296,593 sqm or 15.3% of its portfolio leaseable areas in FY18, with a retention rate of 84% and average negative rental reversion of 3.2%.

FLT has a small 2.5% of its portfolio income due to expire in FY19 and 5.9% in FY20. This should provide stable income visibility for the trust.

On Oct 18, the trust acquired another property in Netherlands for EUR 25.4 million ($39.8 million) or at a NPI yield of 5.4%. The property is fully leased to Friesland Campina on a 15-year triple net lease contract. This will increase its European portfolio to 22 properties. The purchase is expected to be funded by debt and accretive to bottomline.

The vendor is its sponsor, Frasers Property Investments (Europe) BV. The freehold property is a recently completed property built to BREEAM's “very good” certification requirements. The property has a GFA of 31,013 sqm and has a possible future expansion of 10,000 sqm, if the need arises, which will further enhance the yield when completed.

As at end Sept, gearing stands at 34.6%. All-in debt cost is slightly higher q-o-q to 2.5%, with 82% of its debt cost on fixed rates. FLT has A$170 million and EUR 50 million of debt to be refinanced in FY19.

“We lower our DDM-based target price to $1.19 on weaker A$ assumption of $1: A$1 vs A$1.03 previously,” says analyst Lock Mun Yee in a Wednesday report.