ARA LOGOS Logistics Trust Reported Strong 1H21 Results, Raising DPU

• ARA LOGOS Logistics Trust (SGX:K2LU) delivered a strong 1H21, as DPU rose 10.6% y-o-y, with the addition of its Australian portfolio from Apr 2021.
• ARA LOGOS Logistics Trust's fundamentals are sound, underpinned by improving DPU visibility from its higher Australia contribution, which has risen to 45% of AUM, and strong leasing momentum into 2H21, as demand recovery gains traction.
• We raised our ARA LOGOS Logistics Trust's FY22-23 DPU forecast by 5% on firmer rental growth assumptions, and see further re-rating catalysts from a stronger-than-expected DPU recovery, deal upside, and potential EPRA NAREIT index inclusion.
• Our DDM-based target price for ARA LOGOS Logistics Trust (COE: 8.2%, LTG: 2.0%) rises to S$0.95.
• Maintain BUY.

Australian Assets Bolstering NPIs

• ARA LOGOS Logistics Trust's revenue and NPI jumped 15.2% y-o-y and 17.1% y-o-y in 1H21, driven by higher contribution from the recently completed Australian portfolio acquisition, better portfolio performance, and AUD appreciation. Its investments in the New LAIVS Trust and Oxford Property Fund helped deliver a stronger 36.6% y-o-y in distributable income, and ahead of NPI growth.
• Occupancy in Australia improved h-o-h from 98.3% to 99.7%, while its WALE of 10.6 years by NLA (and 6.3 years by GRI) has extended ARA LOGOS Logistics Trust’s portfolio WALE by NLA to 4.4 years, from 2.8 years in 1Q21.

Transitory Vacancy in Singapore, Rents on a Rise

• Singapore’s revenue rose ~4% y-o-y and ~1% h-o-h, with the commencement of new secured in 2H20 and S$1.5m sf in 1H20, and with growth momentum expected into 2H21.

Sponsor Supports Deal Pipeline, DPU Upside

• ARA LOGOS Logistics Trust's portfolio valuation rose ~20% to support its capital recycling efforts, likely in China and Australia in the near term.

Source: Maybank Kim Eng Research - 22 Jul 2021