On 4 February 2025, Frasers Logistics & Commercial Trust (“FLCT”) have announced their first quarter business update for FY2025. Noted that their gearing has increased substantially this quarter, attributable to the acquisition funded by debt, distribution paid as well as weakening of foreign currencies against SGD. Debt maturity profile has also shortened to 2.0 years. There are no other significant updates.
Disclaimer: Not financial advice. All data and information provided on this site is for informational purposes only.
Website: General Announcement::Business Update For The First Quarter Ended 31 December 2024
Photo source: https://fifthperson.com/2023-frasers-logistics-commercial-trust-agm/
Financial Highlights
Distribution Per Unit (“DPU”)
| Metrics | Current | Previous |
|---|---|---|
| Distribution Per Unit | No Update | -4.6% |
| Rating | Unfavorable | Unfavorable |
Based on the announcement on 4 February 2025, DPU was not included in the business update for the first quarter of FY2025.
The metric remains Unfavorable in the previous quarter update as DPU has decreased by 4.6% in the second half of FY2024 compared to the first half of FY2024. The main reason for the decrease was due to an increase in finance costs.
Occupancy
| Metrics | Current | Previous |
|---|---|---|
| Occupancy | 94.3% | 94.5% |
| Rating | Neutral | Neutral |
Occupancy rate as of 31 December 2024 remained relatively unchanged at 94.3%. This is contributed by 99.6% for the logistics and industrial assets and 85.5% for their commercial assets. This metric remained Neutral as the overall remains slightly below my expected healthy occupancy rate of 95%.
Gearing ratio
| Metrics | Current | Previous |
|---|---|---|
| Gearing Ratio | 36.2% | 33.0% |
| Rating | Favorable | Favorable |
Gearing ratio increased to 36.2% as of 31 December 2024. The significant increase was due to acquisition of a logistics property in Singapore that was funded by debt, the distribution payment as well as softening of foreign currencies against SGD during the period. The metric currently remains Favorable as it is a distance away from the MAS limit of 50%.
Interest coverage
| Metrics | Current | Previous |
|---|---|---|
| Interest Coverage | 4.9x | 5.0x |
| Rating | Favorable | Favorable |
The interest coverage remained relatively unchanged at 4.9 times as of 31 December 2024. The metric remains Favorable as it is above my preferred interest coverage of 3.0 times. The high interest coverage is attributable to their low cost of borrowings of 2.9% for the trailing 12 months and relatively low gearing ratio.
Debt maturity profile
| Metrics | Current | Previous |
|---|---|---|
| Debt Maturity Profile | 2.0 years | 2.4 years |
| Rating | Neutral | Favorable |
Weighted average term to maturity of their debt shortened to 2.0 years as of 31 December 2024. This metric shifted towards Neutral. Do note that approximately 50.2% of their debt will mature by end of FY2026.
Price to Book Ratio
| Metrics | Current | Previous |
|---|---|---|
| Price to Book Ratio | 0.76 | 0.85 |
| Rating | Favorable | Favorable |
Based on the announcement on 4 February 2025, net asset value was not included in the business update for the first quarter of FY2025.
The Price to Book (“P/B”) ratio became more discounted at 0.76. This is computed using the closing share price of SGD0.860 per share on 18 February 2025 and the net asset value per share of SGD1.13 as of 30 September 2024. The P/B ratio is Favorable as it is still a discount from book value.
As of 18 February 2025, the Market Capitalization is approximately SGD3,235 million.
Website: Yahoo Finance: Frasers Logistics & Commercial Trust (BUOU.SI)
Dividend
| Year | Yield | Total |
|---|---|---|
| 2024 | 7.91% | SGD 0.068 |
| 2023 | 8.19% | SGD 0.070 |
| 2022 | 8.86% | SGD 0.076 |
| 2021 | 8.93% | SGD 0.077 |
| 2020 | 8.28% | SGD 0.071 |
With the total dividend payout for the calendar year 2024 amounting to SGD0.068 per share and closing share price of SGD0.860 per share as of 18 February 2025, this translates to a dividend yield of 7.91%. For my benchmark, a reasonable yield would be around an average of 5.25%. The dividend yield for FLCT is Favorable.
Website: Reasonable Dividend Yield 2025Q1 – 5.25%
Investors will need to take note however, that the DPU has been on a downtrend for the last few years. Therefore, there is a risk that it may continue to decrease which may negatively affect share price.
Interest Rate Sensitivity
The Federal Reserve on 30 January 2025 have kept interest rates unchanged at a range of 4.25% to 4.50%. This is due to significant uncertainty in the U.S. economic landscape, with a healthy set of macroeconomic fundamentals that have changed little in recent months, but coming decisions from the Trump administration on immigration, tariffs, taxes and other areas that could prove disruptive.
Website: Fed leaves rates unchanged, sees no hurry to cut again
FLCT have disclosed that every potential +50 bps in interest rates on variable rate borrowings is estimated to reduce DPU by 0.10 Singapore cents per annum. With DPU of SGD0.068 per share for FY2024, this is illustrated as below:
| Change in Interest Rates | Impact on DPU (SGD) | Change as % of FY2024 DPU |
|---|---|---|
| 50 bps | SGD 0.10 | 1.5% |
| 100 bps | SGD 0.20 | 2.9% |
| 150 bps | SGD 0.30 | 4.4% |
| 200 bps | SGD 0.40 | 5.9% |
Other metrics
Tenant profile
FLCT has an enlarged portfolio covering logistics and industrial properties, CBD commercial assets and office and business parks, FLCT has government related entities, well-established multinationals, conglomerates, and publicly listed companies among its tenants.
The high quality and diverse tenant base provide resilience to the FLCT portfolio across challenging events. The top 10 tenants accounted for only 19.7% and 15.0% of GRI contribution for the logistics & industrial tenants and commercial tenants respectively with no single tenant accounting for more than 5.0% during the period. This provides income diversity to the portfolio.
Summary
| Metrics | Financials | Rating |
|---|---|---|
| Distribution Per Unit | No Update | Unfavorable |
| Occupancy | 94.3% | Neutral |
| Gearing Ratio | 36.2% | Favorable |
| Interest Coverage | 4.9x | Favorable |
| Debt Maturity Profile | 2.0 years | Neutral |
| Price to Book Ratio | 0.76 | Favorable |
| Overall | Neutral |
Overall, the fundamentals of FLCT shifted towards Neutral, mainly due to the shortening of debt maturity profile. There are indications that DPU will continue to decrease, especially as FLCT will have to continue to renew their debts in the current interest rate environment. Investors will need to assess their risk appetite.
Background
FLCT is a real estate investment trust (“REIT”) with a portfolio comprising logistic, industrial, and commercial properties diversified across five developed countries – Australia, Germany, Singapore, the United Kingdom (“UK”) and the Netherlands.
FLCT was listed on the Mainboard of Singapore Exchange Securities Trading Limited (“SGX-ST”) on 20 June 2016 as Frasers Logistics & Industrial Trust (“FLT”) and was subsequently renamed FLCT on 29 April 2020 following the completion of a merger with Frasers Commercial Trust (“FCOT”).
FLCT’s investment strategy is to invest globally in a diversified portfolio of income-producing properties used predominantly for logistics or industrial purposes located globally, or commercial purposes (comprising primarily central business district (“CBD”) office space) or business park purposes (comprising primarily non-CBD office space and/or research and development space) located in the Asia-Pacific region or in Europe (including the UK).
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