Frasers Logistics and Commercial Trust (FLCT) is among the TOP 10 largest Singapore REITs (“S-REITs”) by market capitalisation. FLCT has properties in two major categories: 1) Logistics & Industrial and 2) Commercial. The properties are located in the Netherlands, Germany, Australia, UK and Singapore. As of March 2023, FLCT’s total portfolio stands at 105 properties totalling approximately S$6.7 billion. The entire portfolio has approximately 2.6 million square feet of net lettable area.
Let’s take a look at what Frasers Logistics and Commercial Trust has to offer.
Overview of Frasers Logistics Business
Key Highlights to Note:
- Portfolio: 97 Logistics & Industrial and 8 Commercial properties
- Geographic breakdown:
- 65 (Australia), 29 (Germany), Netherlands (6), UK (4) and Singapore
- Retail Portfolio Net Lettable Area (NLA): ~ 2.6 million square feet
- Portfolio Size: S$6.7 billion
- 3.7 Weighted Years Average Lease To Expiry (by Gross Revenue)
Frasers Logistics Gross Revenue & Net Property Income
Gross Revenue increased 123.1% year-over-year from S$195.77 million in FY18 to S$450.19 million in FY22. However, this is a -4.1% decrease from FY21. The main reason for the decline was due to the sale of Cross Street Exchange and weaker exchange rates.
Net Property Income (NPI) for FY22 rose to S$342.1 million from FY18 of S$155.4 million. Both increase in Gross Revenue and Net Property Income (NPI) for FY22 was greatly attributed to their value-accretive acquisition of over S$5 billion since 2016. Additionally, the management actively rebalances the portfolio with divestitures totaling over $1.3 billion, all at prices above book value. The Compound Annual Growth Rate (CAGR) of FLCT’s NPI over 5 years amounted to 21.81%.
Frasers Logistics Distributable Income & Distribution Per Unit
Distributable Income increased 104.3% year-over-year from S$270.08 million in FY21 to S$281.75 million in FY22. The CAGR of FLCT’s Distributable Income over 5 years grew at a rapid pace of 24.22% from FY18 to FY22.
Distribution Per Unit (DPU) decreased -0.78% year-over-year from (S$) 7.68 cents in FY21 to (S$) 7.62 cents in FY22. FY22 DPU of (S$) 7.62 cents represents a trading yield of 5.86% based on the last closing price. The CAGR of FLCT’s DPU over 5 years grew steadily at 1.46% from FY18 to FY22.
Frasers Logistics Gearing Ratio & Property Yield
Gearing Ratio decreased to 27.9% for FY22 from 33.7% in FY21. S$504.9 million in borrowings were repaid with the profits from the sale of Cross Street Exchange. With such a low gearing ratio, this demonstrated that FLCT is financially sound. It has $3.2 billion in debt headroom before meeting its 50% gearing limits. On April 16, 2020, MAS raised the leverage ceiling for S-REITs from 45 percent to 50 percent. FLCT total debt stands at $2.52 billion, where the weighted average tenor of debt is 2.7 years.
Similarly, FCT’s property yield increased slightly to 5.10% in FY22 from 4.85% in FY21. This could be due to an increase in valuation, where valuations were depressed previously during the start of the pandemic.
Frasers Logistics’s Occupancy Rate
Occupancy rates have decreased to 96.40% (FY22) from 99.6% (FY18). This is attributed to Covid-19 pandemic which has drastically affected the demand for commercial building rentals. Since 2021, the demand has slightly recovered across the 5 key markets.
Frasers Logistics’s Debt Risk Management
FLCT’s Average Debt Maturity is 2.7 years. Furthermore, FLCT has an impressive Interest Coverage Ratio (ICR) for FY22 of 13 times. This demonstrates its solid financial health and ability to satisfy interest commitments. As of Sep 2022, it has a total debt of S$1.98 billion.
Frasers Logistics’s Rental Information
FLCT Portfolio has many anchor tenants with the Top 10 customers accounting 24.2% of monthly portfolio gross revenue. Its portfolio weighted average lease expiry (WALE) stands at 4.1 years. Rental reversion for FY22 is expected to be in the negative low single-digit range due to current market uncertainties. Hopefully, rental reversions will begin to improve when the market improves and inflation rates rise.
Frasers Logistics’s Growth Prospects
There are a couple of potential growth prospects for Frasers Logistics and Commercial Trust. Firstly, FLCT is currently developing a new Logistics & Industrial park in the UK. It is expected to be completed in 2023 with a ~10,800 sqm space. In addition, it has plans to acquire four other new logistics and commercial properties in Australia and the UK. These acquisitions are expected to be completed by 2023.
Finally, the need for e-commerce has increased tremendously after the Covid-19 pandemic. Over the next three years, it is anticipated that global retail e-commerce would increase by 9.3% yearly. It is anticipated that this will increase demand for high-quality warehousing, which will be advantageous for FLCT’s logistics properties.
Frasers Logistics’s Past Dividend Yield
Dividend Yield (5 Year)
The current Dividend Yield of FCT stands at 5.75%, it’s 5-year Average Yield stands at 5.09%
Dividend Yield (1 Year)
The current Dividend Yield of FCT stands at 5.75%, it’s 1-year Average Yield stands at 5.91%
FLCT has also built a long-term track record of delivering:
- Consistent historical growth in Gross Revenue, NPI and DPU
- Management are constantly looking for Acquisition opportunities
- Manageable debt which displays how prudent the management team are
FCT, with its consistent fundamentals, appears fairly priced to me, with a current dividend yield of 5.75%.If the yield rises to ~7+%, I would consider adding it to my portfolio.
Disclosure: Do have existing position in Fraser Logistics and Commercial shares.
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Disclaimer: The information provided by LearnToInvest serves as an educational piece and is not intended to be personalised investment advice. Readers should always do their own due diligence and consider their financial goals before investing in any stock.