ESR-LOGOS REIT - Healthy Topline Performance
- ESR-LOGOS REIT (SGX:J91U) reported 3Q22 gross revenue/NPI of S$96.2m/S$69.9m, +57.4%/59.2% y-o-y respectively. The uplift was due to revenue contributions from ARA LOGO Logistics Trust, following the completion of the merger on Apr 2022, and positive rental reversions. See ESR-LOGOS REIT's Announcemet dated 26 Oct 2022. 3Q22 NPI accounted for 28.8% of our FY22F forecast.
- ESR-LOGOS REIT's gearing as at end-3Q22 stood at 40.2%, but is expected to rise to a proforma 42% when the acquisition of the Japan property is completed in Oct 22, assuming it is fully debt funded.
- Portfolio occupancy ticked down q-o-q to 92.4% at end-3Q22, dragged by a dip in Singapore portfolio, while take-up at its Australia assets remained stable at 99.5%.
- In 3Q22, ESR-LOGOS REIT leased/renewed 213k sqm of space and achieved positive rental reversion of 11.4% (2Q: +14.3%), mainly coming from strong performance within the logistics, hi-specs and general industrial properties.
- ESR-LOGOS REIT has 6.4% of leases expiring in 4QFY22F and a further 27% in FY23F. We anticipate the positive reversion trend to continue in FY22F.
- In terms of capital management, ESR-LOGOS REIT’s all-in cost of debt stood at 3.27% at end-3Q22. An estimated 66.6% of borrowings are on fixed rates. ESR-LOGOS REIT has S$390m of debt due to be refinanced in 4Q23F.
- Meanwhile, as part of its strategy to rejuvenate its portfolio, ESR-LOGOS REIT has divested S$132.2m worth of properties year-to-date, at 15.1-21.7% premium to valuation, and announced the acquisition of ESR Sakura DC, a 5-storey modern logistics facility in Japan. The purchase is scheduled to complete by Oct 22 and would enable ESR-LOGOS REIT to replace the income vacuum from divested properties and rejuvenate its portfolio at the same time. In addition, the planned ~S$143m worth of AEIs announced earlier is on track to complete progressively over 4Q22-1Q24.
- We tweak our FY22-24F DPU estimates for ESR-LOGOS REIT down by 0.46-1.56% to factor in higher interest costs, income vacuum from divested properties as well as contributions from new acquisitions. Our DDM-based target price for ESR-LOGOS REIT is lowered to S$0.44 as we bake in a higher cost of equity of 8.3% (vs. 7.77% previously).
Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.
LOCK Mun Yee CGS-CIMB Research | Natalie ONG CGS-CIMB Research | https://www.cgs-cimb.com 2022-10-26 2022-10-26
Previous report by CGS-CIMB:
2022-08-29 ESR-LOGOS REIT - Maiden Foray Into Japan.