Frasers Logistics & Industrial Trust (FLT) reported its 4QFY17 results which met our expectations. Gross revenue and adjusted NPI of A$42.2m and A$32.3m were 4.8% and 4.7% YoY higher than its IPO forecast, respectively. DPU came in at 1.77 S cents, or 8.6% above FLT’s forecast. This was largely driven by inorganic growth as management had actively pursued acquisitions since its listing.

For its FY17 performance (period from 1 Jul 2016 to 30 Sep 2017), gross revenue was A$163.1m, and this formed 99.1% of our projection. DPU of 7.01 S cents constituted 101.4% of our forecast. If we look at the period from listing (20 Jun 2016) to 30 Sep 2017, DPU came in at 8.85 S cents, which beat FLT’s IPO forecast by 6.1%. Operationally, FLT maintained a high portfolio occupancy of 99.4%, with a long WALE of 6.75 years.

Although average rental reversion was - 15.9% in 4QFY17 and -8.2% for the 12-month period in FY17, we believe it was largely due to rents reverting back to market levels upon lease expiry as built-in annual rental escalations for FLT’s leases typically outpace market rental growth. We will provide more details after the analyst briefing.

Maintain BUY, with our S$1.22 fair value estimate under review.

Source: OCBC Research - 2 Nov 2017