Date: September 25, 2024
Broker Name: CGS International Securities Pte. Ltd.

Overview

Frasers Logistics & Commercial Trust (FLT) is a standout REIT in the industrial and logistics sector, with an “ADD” rating. The stock is trading at S$1.16, with a target price of S$1.35. FLT’s focus on industrial and logistics properties, primarily in Australia and Europe, positions it well for future growth.

Strong Industrial and Logistics Portfolio

FLT is particularly noted for its exposure to the robust industrial and logistics sectors in Australia and Europe. These regions continue to see high demand for logistics spaces, driven by growth in e-commerce and supply chain optimization. This portfolio diversification provides FLT with a stable and growing revenue base.

Low Gearing Supports Inorganic Growth

FLT has maintained a low gearing ratio of 33.2% as of 3QFY24, which positions the trust well to pursue inorganic growth opportunities. The low debt levels provide financial flexibility, allowing the trust to take advantage of potential acquisitions or other strategic investments in its key markets.

Commercial Portfolio De-risked

FLT has successfully managed risks in its commercial portfolio. One of the key achievements was the partial back-filling of space vacated by a major tenant, reducing vacancy risks. This strategic move supports income stability and ensures that FLT’s properties continue to generate consistent rental income.

Dividend Yield and Financial Metrics

FLT offers an attractive dividend yield, with forecasts showing a slight increase over the next few years. The trust is expected to deliver a dividend yield of 5.81% in FY24F, rising to 5.97% by FY25F. These yields are supported by FLT’s strong asset performance and strategic management of its portfolio.

Key Financial Metrics

• P/E Ratio (FY24F): 22.03
• Dividend Yield: 5.81% (FY24F), 5.97% (FY25F)
• P/BV: 1.01x (FY24F), 1.02x (FY25F)
• Target Price: S$1.35
• Current Price: S$1.16

Interest Rate Environment Benefits

The declining interest rate environment is expected to benefit FLT, particularly with the forecasted interest rate cuts by the U.S. Federal Reserve. Lower interest rates would reduce funding costs, enhancing FLT’s ability to capitalize on inorganic growth opportunities and further de-risk its balance sheet.

Conclusion

Frasers Logistics & Commercial Trust is well-positioned to benefit from its focus on high-growth industrial and logistics properties in Australia and Europe. With a strong balance sheet, low gearing, and strategic risk management, FLT is expected to deliver sustainable growth and attractive dividend yields, making it a top pick for investors, as highlighted in the September 2024 report by CGS International.