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Author: kimeng   |   Latest post: Wed, 20 Nov 2019, 5:50 PM

 

Frasers Logistics & Industrial Trust: Leveraging on Sponsor Pipeline

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  • Estimated initial NPI yield of 5.1%
  • Healthy portfolio specifications
  • Expected to be DPU accretive Proposed acquisition of 9 properties in

Germany and 3 in Australia

Frasers Logistics & Industrial Trust (FLT) announced that it has entered into various sale and purchase agreements with its sponsor Frasers Property Limited for the acquisition of nine logistics properties in Germany and three logistics properties in Australia.

The 12 properties are freehold, 100% occupied, have a young age of 3.7 years and long WALE of 8.6 years. The agreed property purchase price for this portfolio is ~A$644.7m (EUR320.3m or A$519.2m for the German properties and A$125.5m for the Australian properties).

We estimate the initial NPI yield for this acquisition to be ~5.1%. We are not surprised with this proposed acquisition, as we had recently highlighted our expectations that FLT would recycle its capital from recent divestment proceeds into new acquisitions in Australia and/or Europe.

Positive on This Transaction

We are positive on this transaction given the solid portfolio metrics and the strategic location within the major logistics hubs of Germany and Australia. It will deepen FLT’s presence in its core markets of Melbourne, Sydney and Brisbane in Australia and expand its geographical footprint in Germany by adding one asset each in Berlin and Frankfurt. Post-acquisition, FLT will have a strategic presence across all of the key logistics hubs in Germany.

Its proportion of freehold assets will increase from 77.6% to 81.7%, portfolio age will decline from 7.7 years to 7.0 years and WALE will be increased from 6.5 years to 6.7 years.

Expected to be DPU accretive

Furthermore, this transaction is also expected to be DPU accretive, although the final funding mix (mixture of debt and equity) will only be announced in due course.

Based on FLT’s pro forma 1HFY19 results, this acquisition, coupled with FLT’s recent divestments, is expected to boost its DPU by 1.4% in AUD terms, and 1.1% in SGD terms. This excludes the one-off estimated capital gains tax on the aforementioned divestments.

NAV per unit would have increased by 3.2% in AUD terms and 3.3% in SGD terms, while gearing ratio will increase marginally from 35.1% to 36.1% (assuming proceeds from divestments are used to repay its borrowings). Pending details of the final funding structure and EGM approval, we keep our forecasts for now. Our fair value remains at S$1.20.

Source: OCBC Research - 4 Jul 2019

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Frasers L&I Tr 1.24 0.00 (0.00%) 638 

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