FY2024 Financial Analysis of Frasers Logistics & Commercial Trust

Business Description

Frasers Logistics & Commercial Trust (FLCT) is a Real Estate Investment Trust (REIT) focused on logistics and industrial (L&I) properties, as well as commercial properties including CBD offices and business parks. The trust operates across five developed countries: Australia, Germany, the Netherlands, Singapore, and the United Kingdom. FLCT manages a diverse portfolio of 112 properties valued at S\$6.8 billion, with a significant focus on logistics and industrial assets.

Industry Position and Competitors

FLCT is positioned as a leading REIT within the logistics and industrial sector, known for its high-quality, strategically located assets. The trust competes with other prominent REITs in the logistics and commercial property space, such as Mapletree Logistics Trust and Ascendas Real Estate Investment Trust. FLCT’s competitive advantage lies in its well-diversified portfolio and strong tenant base, which includes leading companies across various industries.

Revenue Streams and Customer Base

FLCT’s revenue primarily comes from rental income generated by its diversified portfolio of logistics, industrial, and commercial properties. The customer base includes tenants from sectors such as third-party logistics, consumer goods, manufacturing, IT services, and government entities. This diversity helps mitigate risks associated with reliance on a single industry or tenant.

Financial Statement Analysis

Income Statement

For the financial year ended 30 September 2024, FLCT reported a revenue of S\$446.7 million, a 6.2% increase from the previous year. Adjusted net property income rose by 2.7% to S\$320.0 million. However, finance costs surged by 40.4% to S\$65.7 million, leading to a net change in the fair value of investment properties resulting in a net fair value loss of S\$40.8 million. Distributable income to unitholders decreased by 2.6% to S\$255.5 million, resulting in a Distribution Per Unit (DPU) of 6.80 Singapore cents, down 3.4% from FY2023 [[7]].

Balance Sheet

As of 30 September 2024, FLCT’s total assets stood at S\$7.1 billion, with investment properties accounting for S\$6.9 billion. The trust maintained a healthy aggregate leverage of 33.0%, providing a debt headroom of S\$801 million to reach the 40% limit. The net asset value per unit decreased to S\$1.13 from S\$1.17 in the previous year [[9]].

Cash Flow Statement

The increase in finance costs and property operating expenses significantly impacted cash flow. The trust’s prudent capital management, including refinancing and fixed-rate borrowings, helped mitigate some financial risks. Notably, FLCT issued S\$175 million in fixed-rate notes in March 2024 and refinanced S\$522 million of borrowings due in FY2024 [[10]].

Key Findings and Investor Action

Strengths

• Strong portfolio occupancy rate of 94.5% with a WALE of 4.2 years, indicating stable rental income.
• Maintained a 5-star GRESB rating for the eighth consecutive year, showcasing sustainability leadership.
• Strategic acquisitions and developments in high-demand regions, such as the acquisition of a prime logistics property in Singapore for S\$140.3 million [[22]].

Risks

• Significant increase in finance costs due to higher interest rates and additional borrowings.
• Net fair value loss of S\$40.8 million on investment properties, potentially impacting future valuations.
• Decreased DPU and net asset value per unit, which may concern income-focused investors [[7], [9]].

Special Activities

FLCT completed a forward-funded logistics development in Maastricht, the Netherlands, which achieved practical completion and lease commencement in October 2024. The trust also completed a significant A\$33.2 million project to improve Central Park, Perth, enhancing its occupancy rate to 94.2% [[21]].

Recommendations

For Current Investors

Hold: Given the trust’s strong portfolio occupancy and strategic developments, holding the stock is recommended. The current dividend yield of 5.9% remains attractive despite the slight decline in DPU.

For Potential Investors

Buy: The trust’s diversified portfolio, strategic acquisitions, and strong sustainability credentials present a compelling case for new investment. The current market conditions and the trust’s proactive management indicate potential for long-term growth.

Disclaimer

This recommendation is based on the financial analysis of FLCT’s FY2024 results. Investors should consider their financial situation and consult with a financial advisor before making any investment decisions.