Compiled by Navin Sregantan
FRASERS LOGISTICS & INDUSTRIAL TRUST | ADD (UPGRADED)
JULY 30 CLOSE: $1.20
TARGET PRICE: $1.27
CGS-CIMB, July 29
Frasers Logistics & Industrial Trust (FLT) Q3 FY2019 distribution per unit (DPU) of 1.73 cents, which was down 3.9 per cent year on year, was in line due to contributions from new acquisitions but partially offset by the weaker Australian dollar (AUD).
The hedged rate for AUD into Singapore dollars (SGD) declined 7 per cent year on year. For the first nine months of FY2019, total DPU of 5.27 cents was slightly above at 80 per cent of our full-year forecast due to similar reasons above.
In July, the AUD cash rate was lowered by the Reserve Bank of Australia to 1 per cent following an earlier cut in June. The cuts could lower AUD borrowing costs and facilitate a more favourable environment for acquisitions in Australia.
We roll forward our valuation, adjust our rental escalation assumptions and lower our AUD/SGD assumptions, which had led to changes in our FY2019-2021 DPU.
We think that the market has fully accounted for the weaker AUD but has yet to appreciate the potential lower cost of debt due to a lower AUD cash rate.
We view FLT's ability to tap its sponsor's pipeline in Australia and Europe, as well as favourable supply-demand dynamics in both markets as key investment merits.
Movements in interest rates and foreign exchange rates continue to be both re-rating catalysts and downside risks.
ASCENDAS REIT | HOLD (MAINTAINED)
JULY 30 CLOSE: $3.03
FAIR VALUE: $2.98
OCBC Investment Research, July 30
Ascendas Reit has changed its financial year-end from March 31 to Dec 31. The reporting period from April 1 to June is thus considered as Q1 of FY2019.
Distribution per unit for the quarter was flat from the previous year at 4.005 cents.
Operationally, Ascendas Reit's portfolio occupancy fell 0.8 percentage points on a quarter-on-quarter basis to 91.1 per cent due to the drag from Australia.
Rental reversions were positive in Singapore but a mixed bag in Australia.
Given the recent weaker-than-expected Singapore GDP figure, it was not surprising to learn that the environment has become more muted with slower inquiries.
However, we believe Ascendas Reit's longer-term prospects remain sound, with potential for rejuvenation in its Science Park properties and inorganic growth opportunities with the likelihood of a lower interest rate environment ahead.
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