Daiwa House Logistics Trust Review @ 28 February 2023

Basic Profile & Key Statistics

• Main Sector(s): Logistics & Retail
• Country(s) with Assets: Japan
• No. of Properties (exclude development/associate/fund): 16

Key Indicators

Performance Highlight

Gross revenue and NPI are lower than IPO forecast due to the impact of weaker JPY/SGD forex. However, distributable income and DPU are able to meet the forecast mainly due to lower finance expenses, trust expenses and realized exchange gain.

Rental Reversion

Rental reversion is at 3% for FY22.

Divestment

Acquisition of DPL Iwakuni 1 & 2, D Project Matsuyama S and underlying freehold land of D Project Iruma S were completed on 8 Dec 2022.

Distribution Breakdown

• Distributable Income Breakdown:
• 96.4% from Operation
• 3.6% from Fees Payable/Paid in Units
• Distribution = 99.9% of Distributable Income
• Distribution to Perpetual Securities Holder = 2.7% of Distributable Income

Related Parties Shareholding

• REIT Sponsor's Shareholding: Below median for more than 20%
• REIT Manager's Shareholding: 0%
• Directors of REIT Manager's Shareholding: Below median for more than 20%

Lease Profile

• Occupancy: ± 5% from median
• WALE: Above median for more than 20%
• Highest Lease Expiry within 5 Years: Below median for more than 10%; Falls in 2024
• Weighted Average Land Lease Expiry: ± 10% from median

Debt Profile

• Gearing Ratio: ± 10% from median
• Gearing Ratio including Perps: ± 10% from median
• Cost of Debt: Below median for more than 20%
• Fixed Rate Debt %: 100%
• Unsecured Debt %: 0%
• WADM: ± 10% from median
• Highest Debt Maturity within 5 Years: ± 10% from median; Falls in 2026
• Interest Coverage Ratio: Above median for more than 20%

Diversification Profile

• Top Geographical Contribution: Below median for more than 10%
• Top Property Contribution: Above median for more than 20%
• Top 5 Properties' Contribution:  ± 10% from median
• Top Tenant Contribution: Above median for more than 20%
• Top 10 Tenants' Contribution: Above median for more than 20%

Key Financial Metrics

• Property Yield: ± 10% from median
• Management Fees over Distribution: Below median for more than 20%; $14.08 distribution for every dollar paid 
• Distribution on Capital:  ± 10% from median
• Distribution Margin: Above median for more than 20%

Trends

• Uptrend: Interest Coverage Ratio, Distribution on Capital, Distribution Margin
• Slight Uptrend: Occupancy
• Flat: DPU
• Downtrend: NAV per Unit, Property Yield

* DPU in 4Q 2021 is annualized to 3 months DPU.

Relative Valuation

• P/NAV: Below average for 1y; Below -1SD for 3y
• Dividend Yield: Above average for 1y & 3y 

Author's Opinion

Favorable	Less Favorable
Diversified Sector	Low REIT Sponsor's Shareholding
High Occupancy	Low REIT Manager's Shareholding
Long WALE	Low Directors of REIT Manager's Shareholding
Well Spread Lease Expiry	0% Unsecured Debt
Low Cost of Debt	High Top Property Contribution
100% Fixed Rate Debt	High Top Tenant & Top 10 Tenants' Contributions
High Interest Coverage Ratio	NAV per Unit Downtrend
Low Top Geographical Contribution	Property Yield Downtrend
Competitive Management Fees
High Distribution Margin
Interest Coverage Ratio Uptrend
Distribution on Capital Uptrend
Distribution Margin Uptrend

Despite the JPY being weak against SGD, DHLT has managed to meet its DPU forecast. In addition, there won't be any concerns related to rising interest rates in the near future since all of its debt is fixed and refinancing won't be required until Nov 2024. Looking ahead, DHLT's performance is expected to improve with the full half-yearly contribution from DPL Iwakuni 1 & 2 and D Project Matsuyama S.

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*Disclaimer: The information presented on this blog is for educational and informational purposes only. The materials, including research and opinions, are based solely on my findings and should not be considered professional financial advice or a definitive statement of fact. I cannot guarantee the accuracy, completeness, or reliability of the information provided. I shall not be held liable for any errors, omissions, or losses that may occur as a result of using the information presented on this blog. It should be noted that the information presented on this blog does not constitute a buy, sell, or hold recommendation for any security. It is crucial to conduct your own thorough research and due diligence before making any investment decisions.