ESR-LOGOS REIT Review @ 6 February 2023

Basic Profile & Key Statistics

• Main Sector(s): Logistics, Industrial & Office
• Country(s) with Assets: Singapore & Australia
  
• No. of Properties (exclude development/associate/fund): 82

Key Indicators

Performance Highlight

Gross revenue, NPI and amount available for distribution have improved yoy due to the merger with ARA LOGOS Logistics Trust in April 2022. S$ 14.5 mil of partial proceeds from the divestment is included in the distribution, resulting in an increase in DPU. Without this amount, DPU would be at 1.325 cents, around a 7.5% decline.

Rental Reversion

E-LOG achieved 11.8% positive rental reversion for FY2022.

Acquisition

On 31 Oct 2022, E-LOG completed the acquisition of ESR Sakura DC.

Divestment

ELOG completed the divestment of 2 Jalan Kilang Barat in Nov 2022. As for the divestments of 49 Pandan Road and 70 Seletar Aerospace View, the completion is expected to be in 1Q 2023 and 2Q 2023 respectively

Development & Asset Enhancement Initiatives

The development of 21B Senoko Loop is expected to be completed in 1Q 2024. The AEI for 7002 AMK Ave 5 and 16 Tai Seng St is expected to be completed by 3Q 2023 and 1Q 2024 respectively. 53 Peregrine Dr has completed the AEI work and has started to contribute income starting 25 October.

Distribution Breakdown

• Distributable Income Breakdown:
• 83.8% from Operation
• 8% from Fees Payable/Paid in Units
• 8.2% from Process from Divestments
• Distribution = 100% of Distributable Income
• Distribution to Perpetual Securities Holder = 6.2% of Distributable Income

Related Parties Shareholding

• REIT sponsor's shareholding: Below median for more than 20%
• REIT manager's shareholding: Above median for more than 20%
• Directors of REIT manager's shareholding: Below median for more than 20%

Lease Profile

• Occupancy: ± 5% from median
• WALE: Below median for more than 20%
• Highest lease expiry within 5 years: Above median for more than 10%; Falls in this year
• Weighted average land lease expiry: Below median for more than 20%

Debt Profile

• Gearing ratio: Above median for more than 10%
• Gearing ratio including perps: Above median for more than 20%
• Cost of debt: Above median for more than 10%
• Fixed rate debt %: ± 10% from median
• Unsecured debt %: ± 10% from median
• WADM: ± 10% from median
• Highest debt maturity within 5 years: ± 10% from median; Falls in 2026
• Interest coverage ratio: Below median for more than 20%

Diversification Profile

• Top geographical contribution: Above median for more than 20%
• Top property contribution: Below median for more than 20%
• Top 5 properties' contribution: Below median for more than 20%
• Top tenant contribution: Below median for more than 20%
• Top 10 tenants' contribution: Below median for more than 20%

Key Financial Metrics

• Property yield: ± 10% from median
• Management fees over distribution: Below median for more than 10%; $8.33 distribution for every dollar paid 
• Distribution on capital: Above median for more than 10%
• Distribution margin: ± 10% from median

Trends

As the merger with ARA LOGS Logistics Trust was only completed in 2Q 2022, I would review the period from 4Q 2018 when ESR-REIT and Viva Industrial Trust merger was completed.

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

ICR for the periods 3Q2020 and before are estimated to reflect a closer figure to MAS ICR.

Relative Valuation

• P/NAV: Average for 1y, 3y & 5y
• Dividend Yield: Above average for 1y & 5y; Average for 3y

Author's Opinion

Favorable	Less Favorable
Diversified Sector	Low REIT Sponsor's Shareholding
High REIT Manager's Shareholding	Low Directors of REIT Manager's Shareholding
Low Top Property & Top 5 Properties Contributions	Short WALE
Low Top Tenant & Top 10 Tenants Contributions	Concentrated Lease Expiry
Competitive Management Fees	Short Weighted Average Land Lease Expiry
High Distribution on Capital	High Gearing Ratio
Interest Coverage Ratio Uptrend	High Perpetual Securities %
	High Cost of Debt
	Low Interest Coverage Ratio
	Top Geographical Contribution
	DPU Downtrend
	NAV per Unit Downtrend
	Property Yield Downtrend

Gross revenue and NPI have improved slightly as compared to the previous quarter, probably due to contributions from newly acquired ESR Sakura DC. However, higher utility expenses and higher interest costs have impacted on the 2H performance.

E-LOG is actively engaging in AEIs and capital recycling to enhance its portfolio, with plans to divest S$450 million of non-core assets with small sizes or short land tenures over the next 12 months. These proceeds will be used to reduce debt or acquire longer land tenures or freehold assets. While management's actions are commendable, it may require some time to achieve a significant return.

For more information, check out:

SREITs Dashboard - Detailed information on individual Singapore REIT

SREITs Data - Overview and details of Singapore REIT

REIT Review - List of previous REIT review posts

To support my work, join:

Singapore REITs Post Telegram Channel - Join to receive posts for Singapore REITs

REIT-TIREMENT Patreon - Support my work and get exclusive content

REIT-TIREMENT Facebook Page - Support by liking my Facebook Page    

REIT Investing Community - Facebook Group where members share and discuss REIT topic

*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 own findings and should not be considered as 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.