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Friday, October 29, 2021

ARA LOGOS Logistics Trust Review @ 29 October 2021

Basic Profile & Key Statistics

ARA LOGOS Logistics Trust (ALOG) is a Logistics REIT that owns 29 properties in Singapore and Australia. 

Performance Highlight

Gross revenue, NPI and distributable income increased YoY mainly due to contribution from the Australian portfolio which was acquired in Apr 2021. However, DPU is lower due to enlarged unitholder base.
YTD rental reversion is at 3.2%.

On 15th October, ALOG announced the proposed merger with ESR-REIT to form ESR-LOGOS REIT. The merged entity would have a total assets of S$ 5.4 B and 87 properties.

The merger is expected to be both DPU and NAV per Unit accretive to unitholders.

Besides the DPU and NAV per Unit accretion, the merger has other benefits as well. In short, larger in size for sponsor and REIT itself, has more acquisition pipeline and a more diversified portfolio. 

The scheme consideration consists of cash and units considerations. For every 1000 units, a unitholder would receive S$ 95 and 1,676 of ESR-REIT units.

Related Parties Shareholding

  • REIT sponsor's shareholding is low at 11.99%
  • REIT manager's shareholding is low at 0.522%
  • Directors of REIT manager's shareholding is moderate at 0.126%

Lease Profile

  • Occupancy is high at 97.6%
  • WALE is long at 4.6 years
  • Highest lease expiry within 5 years is low at 22% which falls in 2022
  • Weighted average land lease expiry is short at 44.01 years

Debt Profile

  • Gearing ratio is moderate at 37.8%. Include perps, gearing is at 43.4%.
  • Cost of debt is high at 2.77%
  • Fixed rate debt % is moderate at 73.7%
  • Unsecured debt % is moderate at 79.7%
  • WADM is moderate at 3 years
  • Highest debt maturity within 5 years is moderate at 33% which falls in 2023
  • Interest coverage ratio is low at 3.6 times
  • Preferred/perpetual securities over debt is slightly high at 12.9%

Diversification Profile

  • Top geographical contribution is high at 69.9% 
  • Top property contribution is high at 27.9% 
  • Top 5 properties contribution is moderate at 62.8% 
  • Top tenant contribution is high at 13.3% 
  • Top 10 tenants contribution is high at 50%

Key Financial Metrics

  • Property yield is high at 6.4%
  • Management fees over distribution is moderate at 12.6% in which unitholders receive S$ 7.94 for every dollar paid 
  • Distribution on capital is high at 4.7%
  • Distribution margin is moderate at 50.7%
  • 2.9% of TTM DPU is from distribution from income support

Trends

Let's look at the period after the synergy with LOGOS in April 2020.
  • Uptrend - NAV per Unit 
  • Slight Uptrend - Interest Coverage Ratio
  • Slight Downtrend - DPU, Distribution Margin
  • Downtrend - Property Yield, Distribution on Capital

Relative Valuation

  • P/NAV - Above +1 SD for 1y, 3y & 5y
  • Dividend Yield - Below -1SD for 1y, 3y & 5y

Author's Opinion

 Favorable Less Favorable
High OccupancyLow REIT Sponsor's Shareholding
Long WALELow REIT Manager's Shareholding
Well Spread Lease ExpiryShort Weighted Average Land Lease Expiry
High Property YieldHigh Cost of Debt
High Distribution on CapitalLow Interest Coverage Ratio
NAV per Unit UptrendHigh Top Geographical Contribution
 High Top Property Contribution
 High Top Tenant & Top 10 Tenants Contributions
 Property Yield Downtrend
 Distribution on Capital Downtrend

As compared to the previous quarter, despite a lower NPI and similar income from fund investments, ALOG managed to increase the distributable income, no detail is provided in the business update though. For the merger with ESR-REIT, below is the indicative timeline:




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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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