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Tuesday, April 27, 2021

ARA LOGOS Logistics Trust Review @ 27 April 2021

Basic Profile & Key Statistics

ARA LOGOS Logistics Trust (ALOG) is a pure Logistics REIT that owns 36 properties in Singapore and Australia. This number includes 9 Australia properties that were acquired in April and excludes 1 acquired property that is under development.

Performance Highlight

Gross revenue and NPI increased YoY by 8.2% and 8.7% respectively due to e commencement of new leases at several properties as well as higher revenue generated from the Australia properties. Include the 2.5mil retention in 1Q 2020 and exclude the 0.6 mil capital distribution in 1Q 2021, the DPU is increased by 6.6% YoY. The capital distribution refers to reimbursements received from the vendor in relation to outstanding lease incentives at the point of completion of the acquisition of certain properties in Australia and rental support received from the vendor in relation to a property acquired in Australia.
Rental reversion is at 0.9%.
ALOG has completed the acquisition for all proposed Australia properties in April. Note that the Heron Property is currently still under development and expected to complete by November 2021. 
After the acquisition, ALOG has announced to divest ALOG Changi DistriCentre 2 in Singapore and Kidman Park in Australia. The divestment for Kidman Park is expected to have an impact on DPU as below:
Gearing ratio is expected to be reduced to 37.1%. Both divestments are expected to complete by 2Q 2021.

Related Parties Shareholding

  • REIT sponsor's shareholding is low at 10.96%
  • REIT manager's shareholding is low at 0%
  • Directors of REIT manager's shareholding is moderate at 0.14%

Lease Profile

  • Occupancy is high at 99.1%
  • WALE is short at 2.7 years
  • Highest lease expiry within 5 years is low at 23.2% which falls in this year
  • Weighted average land lease expiry is short at 44.51 years

Debt Profile

  • Gearing ratio is moderate at 37.4%
  • Cost of debt is high at 3.09%
  • Fixed rate debt % is slightly low at 69.1%
  • Unsecured debt rate % is moderate at 72.2% (as per previous quarter)
  • WADM is moderate at 2.8 years
  • Highest debt maturity within 5 years is high at 41% which falls in 2024
  • Interest coverage ratio is high at 4.3 times
  • Preferred/Perpetual Securities over Debts is high at 16.4%

Diversification Profile

  • Top geographical contribution is high at 73.7%
  • Top property contribution is high at 27.9%
  • Top 5 properties contribution is moderate at 62.8%
  • Top tenant contribution is high at 13.9% 
  • Top 10 tenants contribution is high at 51.5% 

Key Financial Metrics

  • Property yield is high at 6.8%
  • Management fees over distribution is low at 12% in which unitholders receive S$ 8.33 for every dollar paid 
  • Distribution on capital is high at 5%
  • Distribution margin is high at 52.1%
  • 2.9% of past 4 quarters DPU is from income support

Trends

  • Slight Downtrend - Interest Coverage Ratio, Property Yield
  • Downtrend - DPU, NAV per Unit, Distribution on Capital, Distribution Margin
If we only look at the period after the synergy with LOGOS in April, then all the above items mentioned are stabilized.

Relative Valuation

  • Dividend Yield - Past 4 quarters DPU @ 5.606 cents / average yield @ 8.48% = S$ 0.66
  • Price/NAV - NAV @ S$ 0.58 x average P/NAV @ 1.1 = S$ 0.64


Author's Opinion

 Favorable Less Favorable
High OccupancyLow Sponsor's Shareholding
Well Spread Lease ExpiryLow Manager's Shareholding
High Interest Coverage RatioShort WALE
High Property YieldShort Weighted Average Land Lease Expiry
Competitive Management FeesHigh Cost of Debt
High Distribution on CapitalConcentrated Debt Maturity
High Distribution MarginHigh Perpetual Securities %
 High Top Geographical Contribution
 High Top Property Contribution
 High Top Tenant & Top 10 Tenants Contributions

ALOG performance and fundamental has seen improving since LOGOS joined in. However, with the enlarged unitholders base and the divestment of Kidman Park, ALOG DPU is impacted. Let's see how the manager would turn things around moving forward.


For more information, you could refer to:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and Detail of Singapore REIT

REIT Analysis - List of previous REIT analysis posts

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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 and 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.

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