SINGAPORE (May 4): CGS-CIMB is maintaining its “add” or “buy” call on real estate investment company Frasers Logistics and Industrial Trust (FLT), but at a revised target price of $1.30. This is down 2 cents from its previous $1.32 call, analysts Lock Mun Yee and Eing Kar Mei say in an April 30 note.
Their move follows the REIT’s recent announcement which also marks its first result since its merger with Frasers Commercial Trust took off on April 29.
Collectively, the merged entity – Frasers Logistics Commercial Trust (FLCT) – booked a distribution per unit (DPU) of 1.73 cents for 2QFY20 ended March, down from the 1.76 cents logged the year before.
Income available for distribution for the quarter was up 16.7% to A$43.1 million ($39 million) from A$36.9 million a year ago. This follows a 12.8% growth in revenue to A$67.3 million on the back of acquisitions in Europe and Australia, the group noted in a regulatory filing on Apr 30.
See: Frasers Logistics & Commercial Trust 2QFY20 DPU dips 1.7% to 1.73 cents
FLT is mainly occupied by logistics and consumer segments (74.8% of properties) which are used for logistics/warehousing operations, temperature-controlled warehouses and manufacturing.
Based on its results, Lock and Eing note FLT’s remains fully occupied, following three leasing transactions in 2Q20 which gave it a 0.6% positive rental reversion. They add that FLT had 0.5% of gross rental income left for renewal at end-March 2020, and a further 7.8% in FY21F.
And now that FLT has merged to become FLCT, the duo are confident that group’s collective enlarged portfolio of 99 quality industrial and commercial located in Australia, Germany, Netherlands, the UK and Singapore brings more opportunities to the REIT.
“Not only is the merger DPU accretive for FLT, the enlarged portfolio would bring some diversification to FLT’s existing portfolio in terms of geography and asset class,” they say.
They add that there could also be opportunities for economies of scale within the expanded portfolio.
As at 2.01pm shares at FLCT were down 6.0 cents or 5.66% to trade at $1.00.