ARA LOGOS Logistics Trust Analysis @ 28 October 2020

Basic Profile & Key Statistics

ARA LOGOS Logistics Trust (ALOG) is a pure Logistics REIT that owns 27 properties in Singapore and Australia.

Quarter Performance Review

Gross revenue and NPI increased by 7.5% YoY and 8.3% YoY respectively due to higher revenue contribution and commencement of the new leases. Distributable income increased by 12.3% YoY. If we consider only distribution from the operation, the increase is 19%.

DPU increased by 11.3%. DPU from operation increased by 17.9%. 0.092 cents is from the release of retention.

Rental reversion dropped by 9.4% in 3Q alone, while the rental version YTD is -1.0%.

Lease Profile

Committed occupancy remains slightly high at 97%. WALE is short at 2.5 years where the highest lease expiry of 32.8% falls in 2021. Weighted land lease expiry (by GRI) is short at 45.24 years. 

Debt Profile

Gearing ratio is high at 40.5%. Cost of debt is high at 3.3% with a moderate level of unsecured debt. Fixed rate debt is low at 68.1%. Interest cover ratio improved slightly to 3.7 times. WADE is long at 3.3 years where the highest debt maturity of 43% falls in 2024.

Diversification Profile

73.8% of income is from Singapore properties and the remaining from Australia properties. Top property, top tenant and top 10 tenants contributions are high at 25.6%, 14.2% and 53.8% respectively. 

Key Financial Metrics

Property yield is high and distribution on capital are high at 6.5% and 4.5% respectively. Management fee is moderate in which unitholders receive S$ 7.09 for every dollar paid. Distribution margin is slightly low at 46.4%. Including retention, distribution on capital and distribution margin would be 4.6% and 47.3% respectively.

Trends

Flat - Property Yield

Downtrend - DPU, NAV per Unit, Interest Cover Ratio, Distribution Margin

Interest cover ratio and distribution margin have been stabilized since 2Q 2019.

Relative Valuation

i) Average Dividend Yield  - Average yield at 8.14%,  apply the past 4 quarters DPU of 5.16 cents will get S$ 0.635. Include retention, DPU would be 5.254 cents, which will translate into S$ 0.645.

ii) Average Price/NAV - Average value at 1.11, apply the latest NAV of S$ 0.581 will get S$ 0.645.

Author's Opinion

Favorable	Less Favorable
WADE	Short WALE
High Property Yield	Concentrated Lease Expiry
High Distribution on Capital	Short Weighted Average Land Lease Expiry
	High Gearing Ratio
	High Cost of Debt
	Concentrated Debt Maturity
	High Top Geogprahical Contribution
	High Top Property Contribution
	High Top Tenant & Top 10 Tenants Contribution
	DPU Downtrend
	NAV per Unit Downtrend

ALOG performance has seen some turn around this year. YTD gross revenue, NPI and adjusted DPU  have been improved YoY. Note that this year ALOG has split out the tax-exempt income of the divestment of Jinshan Chemical Warehouse from distributable income from operations in 2019, which amount up to S$ 4.1 million for FY2019. This is the main reason for YoY increase of distributable income and adjusted DPU. 

On the same day of the result announcement, ALOG also announced proposed acquisitions and fund investments for Australia properties.

ALOG proposed to acquire 5 logistics properties in Australia, 49.5% interest in New LAIVS Fund (which holds 4 properties) and 40% interest in Oxford Property Fund (which holds 1 property).

Funding would be from private placement, equity fundraising, and external borrowings. 

Pro forma DPU decreased by 1.9%, NAV per Unit decreased by 2.2% and gearing increased to 42.9%. The Pro Forma DPU decreased is based on 1H20 without distribution retention. Add back the retention, 1H DPU would be 2.506 cents, which means the Pro Forma DPU would be reduced by 9.1%.

Detail for private placement and the preferential offer would be announced by ALOG later. An EGM would be held to get unitholders' approval for this acquisition.

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*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions as well as loss, or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.