Frasers Logistics & Industrial Trust (FLT) reported its 1QFY18 results which met our expectations. Gross revenue and NPI of A$42.4m and A$34.8m were 6.9% and 4.3% higher YoY, respectively, and both formed 24.2% of our FY18 forecasts. DPU in AUD terms was 1.70 A cents, down from 1QFY17’s 1.74 A cents as management opted to take 78.1% of its management fees in units versus 100% in 1QFY17. We believe this is a prudent approach to limit the impact of longer term dilution to unitholders.

DPU in SGD terms rose 3.4% and this was attributed to the healthy currency hedge rate of A$1: S$1.0583 which FLT entered into (1QFY17: A$1: S$1). This formed 25.1% of our full-year forecast. Operationally, FLT’s occupancy remained near-full at 99.4%, while portfolio WALE was extended slightly to 6.79 years.

Three lease renewals with a total GLA of 66,737 sqm were signed during the quarter. Although there was an average negative reversion of 5.1%, we believe this was largely due to rents reverting back to market levels as built-in annual rental escalations for FLT’s leases typically outpace market rental growth.

We will provide more details after the analyst conference call. Maintain BUY and S$1.25 fair value estimate on FLT.

Source: OCBC Research - 26 Jan 2018