ESR-LOGOS REIT - DBS Research 2022-07-28: Recalibrating For Long-Term Growth

ESR-LOGOS REIT - Recalibrating For Long-Term Growth

ESR-LOGOS REIT (SGX:J91U) | SGinvestors.ioESR-LOGOS REIT (SGX:J91U)

ESR-LOGOS REIT's 1H22

Revenues and NPI driven by 2 months’ contribution from merger with ARA LOGOS Logistics Trust completed on 22 April 2022.

1H22 DPU of 1.46 cents in line with estimates.

Positive rental reversions of 14.3% in 2Q22.

Only 18.0% of portfolio leases expiring in FY22.

All-in financing costs of less than 3%.

Ongoing portfolio recalibration to drive future organic growth.

Our thoughts on ESR-LOGOS REIT

  • In our view, ESR-LOGOS REIT (SGX:J91U)’s merger with ARA LOGOS Logistics Trust (SGX:K2LU) and the ongoing recalibration is very timely. In an environment where cap rates remain tight while interest rates continue to creep up, accretive acquisitions are becoming increasingly challenging. With the merger now completed, ESR-LOGOS REIT has shifted its focus to recalibrating its portfolio and reallocating capital into higher yielding opportunities. Fortunately for ESR-LOGOS REIT, they have capital gains of up to S$62m that they can tap into to smoothen distributions over the next few years while it carries out its recalibration initiatives.
  • Operationally, we believe the brunt of higher utility costs has already been reflected in 1H22 and margins should stabilise and potentially improve going forward.
  • Furthermore, the bulk of its utility costs are now recoverable from tenants, with no loans due for refinancing until late next year.
  • In addition to the recalibration efforts to drive organic growth, ESR-LOGOS REIT continues to be on the lookout for accretive acquisitions. An initial pipeline of US$2.0bn has been identified, and even as cap rate spreads continue to compress, we understand that acquisitions in Singapore and Japan remain conducive.
  • The Sponsor has also just announced the acquisition of Mr Tong Jinquan’s stake in both the Manager and ESR-LOGOS REIT. Following the acquisition of Mr Tong Jinquan’s stakes, ESR Group will now have a more than 90% stake in the Manager and become the single largest unitholder in ESR-LOGOS REIT with a ~14.4% stake. With the increased commitment, we believe that the Sponsor will now be even more focused and aligned with ESR-LOGOS REIT’s ambitions to grow into one of the largest industrial S-REITs.
  • We will be maintaining our BUY recommendation on ESR-LOGOS REIT with a target price of S$0.50.




Above is the excerpt from report by DBS Group Research.
Clients of DBS may access the full report in PDF @ https://www.dbs.com/insightsdirect/.




Dale LAI DBS Group Research | Derek TAN DBS Research | https://www.dbs.com/insightsdirect/ 2022-07-28



Read also DBS's most recent report:
2022-10-27 ESR-LOGOS REIT - Positive Rental Reversions Maintained.

Previous report by DBS:
2022-10-14 ESR-LOGOS REIT - Into The Land Of The Rising Sun; Portfolio Rejuvenation To Drive Growth.

Price targets by other brokers at ESR-LOGOS REIT Target Prices.
Listing of research reports at ESR-LOGOS REIT Analyst Reports.

Relevant links:
ESR-LOGOS REIT Share Price History,
ESR-LOGOS REIT Announcements,
ESR-LOGOS REIT Dividends & Corporate Actions,
ESR-LOGOS REIT News Articles















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