Frasers Logistics & Industrial Trust (FLT) listed on the SGX on 20 June 2016. It was initially established to invest in logistics and industrial properties located in Australia. However, in early 2018, FLT expanded its investment mandate to include properties in Europe, leading to its latest acquisitions in Germany and the Netherlands.
In this article, I’ll revisit FLT’s fundamentals, give an update on its most recent financial results, and assess its valuation at its current price. Here are 10 things to know about FLT before you invest.
1. As at 5 November 2018, FLT owns 83 properties valued at A$2.98 billion. This is from 51 properties worth A$1.58 billion when FLT first listed in 2016. Out of FLT’s current portfolio, 61 properties are located in Australia. Collectively, they are worth A$2.01 billion and represent 67% of FLT’s portfolio. FLT also owns 17 properties in Germany and four properties in the Netherlands.
2. Presently, FLT owns 57 freehold properties, which represent 70% of its portfolio value. Eighteen properties have a remaining land lease tenure of above 75 years (accounting for 25% of the portfolio) and eight properties have less than 50 years of remaining land lease tenure. These 8 properties are:
|Property||Leasehold Expiry Date||Value (A$ million)|
|38-52 Sky Road East, Melbourne Airport||30 June 2047||27.8|
|96-106 Link Road, Melbourne Airport||30 June 2047||26.3|
|17-23 Jets Court, Melbourne Airport||30 June 2047||7.7|
|25-29 Jets Court, Melbourne Airport||30 June 2047||11.0|
|28-32 Sky Road East, Melbourne Airport||30 June 2047||9.5|
|115-121 South Centre Road, Melbourne Airport||30 June 2047||5.1|
|2-46 Douglas Street, Port Melbourne||30 Mar 2053||22.6|
|Lot 104 Springhill Road, Port Kembla|
Lot 105 Springhill Road, Port Kembla
|13 Aug 2049|
20 Aug 2049
3. As at 30 September 2018, FLT derives income from 96 tenants and has a 99.6% occupancy rate for its overall portfolio. Its pool of tenants comprises global players in industries like fast-moving consumer goods, logistics, manufacturing, and automotive. Its 10 biggest tenants contribute 32% of FLT’s gross rental income (GRI); Coles Supermarkets is FLT’s biggest tenant and contributes 7% of its GRI. The list of FLT’s top 10 tenants are as follows:
|Tenant||Proportion of GRI (%)||WALE (years)|
FLT’s portfolio has a weighted average lease expiry (WALE) of 6.95 years. FLT has relatively long leases with key tenants and 83% of leases will only start to expire in FY2022 onwards.
4. FLT has achieved steady growth in gross revenue and distributable income over the last two years. This was contributed by fixed annual rental increments from its properties in Australia and the acquisition of new properties in Australia, Germany, and the Netherlands during the period.
5. Distribution per unit (DPU) increased 2.6% year-on-year to 7.19 cents in FY2018. This was due to improved financial results and a slightly higher hedged exchange rate between the Australian and the Singapore dollar.
6. As at 30 September 2018, FLT has total gross borrowings of A$1.11 billion and a gearing ratio of 35.4%. Average cost of borrowings is 2.50% and average weighted debt maturity is 2.9 years. Seventy-nine percent of FLT’s debt is hedged at fixed interest rates. Presently, FLT has a debt headroom of A$546 million to finance any potential acquisitions or asset enhancement initiatives before reaching the regulatory gearing limit of 45%.
7. FLT’s Australian leases have a built-in average annual rental increment of 3.1%. Meanwhile, 92% of leases in FLT’s Europe portfolio enjoys either a fixed or consumer price index-linked annual rent increment. These leases will contribute steady growth to GRI over the long-term.
8. Frasers Property is the major unitholder and sponsor of FLT. Frasers Property is a leading international real estate conglomerate with total assets worth over S$32 billion. As at 29 November 2018, it owns a 21% stake in FLT. FLT has rights-of-first-refusal (ROFR) to 46 properties owned by Frasers Property. Of these, 17 properties are located in Australia and 29 are located in Europe. FLT’s ROFR properties provide opportunities for the REIT to expand its portfolio via acquisitions from its sponsor.
As at 8 February 2019, FLT is trading at S$1.08 a unit.
9. Dividend yield: In FY2018, FLT paid 7.19 cents in DPU. Thus, its current dividend yield is 6.65%, which is above its 15-month average of 6.55% per annum. FLT’s yield is slightly lower than other industrial REITs listed in Singapore. (You can click to view and compare yields of Singapore REITs here.)
10. P/B ratio: As at 30 September 2018, FLT has net assets of S$0.94 per unit. Thus, its current P/B ratio is 1.24, higher than its two-year average of 1.14. Evidently, FLT’s P/B ratio has been falling since Q1 2018. This is due to a marginal decline in FLT’s unit price despite its gradual increment in net assets in FY2018.
The fifth perspective
2018 was an eventful year for FLT. It further strengthened its portfolio with net acquisitions of 21 properties — mainly in Germany and the Netherlands — which contributed to growth in revenues and distributable income. For FY2019, FLT’s properties in Europe will contribute their first full year of revenue and distributable income.
Despite being a relatively new REIT, FLT has many attributes which separates itself from other SGX-listed industrial and logistics REITs. Firstly, it has the highest proportion of freehold assets. Secondly, it has a well-structured long-term lease profile. Thirdly, it has a highly-experienced sponsor which is pivotal to FLT’s long-term growth. In terms of valuation, there is not much past data for us to evaluate against as FLT only listed in 2016. But in comparison to other Singapore industrial/logistics REITs, FLT’s dividend yield is slightly lower at 6.65%.
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