- ESR-LOGOS REIT (SGX:J91U) reported 3Q23 revenue of S$93.9m (-5.3%/-2.4% q-o-q/ y-o-y), forming ~74%/74% of our consensus/ FY23E forecasts. Margin dipped to ~69% (guided at ~70% for full year) and led to lower NPI (-7.3%/-6.6% q-o-q/ y-o-y).
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- While we still expect sequential and y-o-y rental growth, we see that ESR-LOGOS REIT's DPU growth will likely to moderate more through 2H24. Meanwhile, medium-term catalysts may take longer to play out.
- We cut our target price for ESR-LOGOS REIT to S$0.31 from S$0.38, but maintain BUY on FY23E yield of 9.3%.
Mixed operational performance
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- Nonetheless, we note the offsetting effect going into FY24 from UE Biz Hub as the hotel portion will be renewed at ~30% negative reversion.
- Portfolio occupancy fell to 90.3% (-260bps) as Singapore assets (-390bps) were weighed down by seasonal effects from divestments pending completion, redevelopment and newly TOP-ed assets.
- Overall, new and renewed leases signed by ESR-LOGOS REIT in 3Q represents 8.7% gross rental income (GRI) that was due for expiry in 2H23 (remaining lease expiry in FY23: 6.4% GRI).
Divestments of S$433.5m executed
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