Frasers Logistics & Commercial Trust - OCBC Investment 2024-11-07: Solid Rental Reversions Likely To Continue

• Frasers Logistics & Commercial Trust’s 2HFY24 adjusted net property income (NPI) rose 3.7% y-o-y to S$161.3m but DPU fell 5.7% to 3.32 Singapore cents due largely to a 45.6% jump in finance costs to S$36.4m but partially offset by higher capital distributions from divestment gains (S$28.2m versus S$11.7m in 2HFY23).

2HFY24 and FY24 DPU declined 5.7% and 3.4% y-o-y but met our expectations

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Robust 4QFY24 and FY24 portfolio rental reversions of 26.8% and 23.6% respectively

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• There was a slight negative rental reversion of 2.9% for its Alexandra Technopark property, as management continued to seek replacement tenants for the space vacated by Google. It has backfilled 25% of the first tranche of space vacated by Google in Feb 2024, and also secured pre-commitment for 15% of the space to be given back in Dec 2024. Current leasing momentum has been affected by the slowdown in decision making of prospective tenants. For FY24, overall portfolio rental reversions came in at a commendable 23.6%.
• Looking ahead, Frasers Logistics & Commercial Trust commented that its L&I portfolio remained under-rented, with the biggest upside potential coming from Australia (30% under-rented), followed by UK (23%), the Netherlands (22%) and Germany (13%).
• Frasers Logistics & Commercial Trust announced on 10 Oct 2024 that it had secured the lease renewal with its largest tenant, the Commonwealth of Australia at its Caroline Chisholm Centre (CCC) property in Australia until 2037. Commonwealth of Australia will thus continue to occupy 100% of the building, and this removes the overhang over its largest tenant which contributed 4.5% of its gross rental income. However, the renewal came with a negative rental reversion of below -10% on an incoming rent compared to outgoing rent basis.
• Rental reversion was in the high-30% range if we look at the lease from an average gross rent comparison between the old and new lease due to fixed annual rental step-ups of 3.25%.

Slightly lower occupancy rate of 94.5%

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OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2024-11-07 SGinvestors.io

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