Broker Name: CGS International Date of Report: May 7, 2025
Frasers Logistics & Commercial Trust: Navigating Mixed Results with Balance Sheet Strength
CGS International provides a detailed analysis of Frasers Logistics & Commercial Trust’s (FLCT) recent performance, highlighting a weaker first half of FY25 but noting potential upside supported by the trust’s robust balance sheet. The report maintains an ‘Add’ rating for FLCT, despite a necessary downward adjustment to the target price based on revised distribution per unit (DPU) forecasts.
1HFY25 Performance Falls Short
FLCT’s distribution per unit (DPU) for the first half of FY25 came in at 3 Scts, which was below expectations, representing only 44.8% of the analyst’s previous full-year forecast.
Key figures for 1HFY25:
- Revenue increased by 7.5% year-on-year (yoy) to S\$232.3m.
- Net Property Income (NPI) increased by 5.4% yoy to S\$167.4m.
- Growth was attributed to contributions from Ellesmere Port and Maastricht Property, alongside acquisitions of four European and one Singapore logistics properties.
- Distribution income, however, decreased by 13.5% yoy to S\$113m.
- The decline in distribution income was primarily due to higher interest and tax expenses.
- This was partially offset by higher capital distributions amounting to approximately S\$18m.
- The reported 1HFY25 DPU of 3 Scts represents a 13.8% yoy decrease.
- Management’s decision to take a lower portion of management fees in units (43.1%) compared to the previous 100% also impacted the DPU.
Portfolio Occupancy and Rental Reversion
The report notes a slight dip in average portfolio committed occupancy, falling 40 basis points quarter-on-quarter (qoq) to 93.9% at the end of 1HFY25.
- This decline was driven by lower take-up at commercial properties, which stood at 84.1% occupied.
- The logistics & industrial (L&I) portfolio maintained a high occupancy rate of 99.6%.
- Across the portfolio, new/renewal leases signed in 2QFY25 (144k sq m) saw an average rental uplift of +2.5% (incoming vs. outgoing rents).
- L&I leases renewed strongly at +8.7% reversion in 2QFY25.
- Commercial rental reversion averaged -7.1%, mainly impacted by negative reversions at Alexandra Technopark (ATP).
- Progress is being made at ATP, with about 54% of the space previously occupied by Google now backfilled.
- ATP’s committed occupancy reached 77.1% (compared to an actual occupancy of 66.4% at end-2QFY25).
- Looking ahead, 5.2% of L&I and commercial leases are due for re-contracting in 2HFY25F.
- A key lease up for renewal is the Techtronic lease, which management indicated is unlikely to be renewed.
- FLCT is exploring options for this property, including subdividing the space for smaller tenants.
Healthy Balance Sheet and Growth Strategies
FLCT’s balance sheet remains a point of strength.
- Gearing stood at a healthy 36.1% as at end-2QFY25.
- The cost of borrowing was 3% at the end of the quarter.
- Management anticipates the average funding cost will rise to the mid-3% range after refinancing the remaining S\$395m of debt maturing in 4QFY25F.
- For growth, FLCT intends to continue evaluating both acquisition and divestment opportunities to optimize long-term portfolio returns.
Recommendation and Outlook
The analyst reiterates an ‘Add’ rating for FLCT but has lowered the target price.
- The DDM-based target price is cut to S\$1.11 from S\$1.35.
- This reduction is due to a downward revision in FY25-27F DPU forecasts.
- FY25F DPU is reduced by 14.6%, FY26F by 21.7%, and FY27F by 18.6%.
- The DPU cuts reflect lower projected capital distributions and higher-than-expected interest expenses.
- The cost of equity used in the DDM model remains unchanged at 8.34%.
- The Add rating is maintained as the projected FY26F dividend yield of 6.2% is believed to have priced in much of the slower DPU outlook.
- FLCT’s inorganic growth potential is considered intact due to its robust balance sheet.
- A key re-rating catalyst identified is accretive new acquisitions.
- Downside risks include the inability to make accretive purchases and a weak macroeconomic outlook negatively impacting demand for industrial and commercial spaces, thereby affecting occupancy and rental pricing power.
ESG Profile and Efforts
FLCT demonstrates strong performance in environmental, social, and governance (ESG) areas.
- FLCT received a B- ESG Combined Score by LSEG in 2023, with A+ scores in ESG controversies and for its Environmental, Social, and Governance pillars individually.
- Its sustainability framework focuses on acting progressively, consuming responsibly, and focusing on people.
- Key targets include achieving net zero carbon status by 2030 and reducing water usage intensity by 20% by 2030 (from a 2015 base).
- FLCT aims for at least an average 4-star Green Star Performance for its Australian industrial portfolio and BCA Green Mark Gold certifications for all Singapore commercial assets by FY24.
- Climate risk assessments and implementation of TCFD-aligned plans are targeted by 2024.
- The trust maintained a 5 Star rating in the 2023 GRESB assessment for the third consecutive year, ranking second in Asia Pacific.
- Its MSCI ESG rating was upgraded to ‘AA’ from ‘A’ in 2023.
- Areas noted for attention include environmental innovation (rated D+), shareholders (D+), and community (C-) scores, although the analyst believes overall scores should improve as ESG efforts continue.
- Notable achievements include Farnborough Business Park being the first site globally to achieve 3-star commercial site certification by Fitwel in 2023.
- Recycling efforts during the Central Park façade replacement project included 120 tonnes of aluminium, 137 tonnes of polyethene, and 206 tonnes of steel.
- Solar panels across the portfolio can produce over 11MW at peak.
- 75% of FLCT’s portfolio was green certified as at end-3QFY24.
- CSR activities include supporting the Milk and Diapers Programme in Singapore.
- LSEG rates FLCT highly for workforce (A), product responsibility (A), management (A), and CSR strategy (A).
The analyst notes that current valuations do not explicitly ascribe a premium or discount for ESG achievements, but ongoing ESG efforts could lead to improved operational efficiencies and financial performance.
Peer Comparison
The report includes a comparison of FLCT against other Singapore REITs across various sectors as of May 7, 2025.
|
Bloomberg Ticker |
Rec. |
Price (LC) as at 07 May 25 |
Target Price (LC) (DDM-based) |
Mkt Cap (US \$m) |
Last reported asset leverage |
Last stated NAV |
Price / Stated NAV |
Dividend Yield (%) |
|
|
|
|
|
|
|
|
|
FY25F |
FY26F |
FY27F |
| Hospitality |
|
|
|
|
|
|
|
|
|
|
|
| CapitaLand Ascott Trust |
CLAS SP |
Add |
0.86 |
1.13 |
\$2,537 |
39.9% |
1.15 |
0.75 |
7.1% |
7.3% |
7.4% |
| CDL Hospitality Trust |
CDREIT SP |
Add |
0.79 |
0.87 |
\$774 |
41.8% |
1.48 |
0.53 |
6.5% |
7.6% |
7.9% |
| Far East Hospitality Trust |
FEHT SP |
Add |
0.55 |
0.74 |
\$861 |
31.2% |
0.92 |
0.60 |
7.0% |
7.1% |
7.2% |
| Frasers Hospitality Trust |
FHT SP |
NR |
0.63 |
NA |
\$773 |
35.0% |
0.64 |
0.98 |
4.1% |
4.4% |
4.8% |
| Simple Average |
|
|
|
|
\$1,236.25 |
37.0% |
0.80 |
0.72 |
6.2% |
6.6% |
6.8% |
| Industrial |
|
|
|
|
|
|
|
|
|
|
|
| AIMS AMP AAREIT |
AAREIT SP |
NR |
1.23 |
NA |
\$754 |
33.7% |
1.26 |
0.98 |
7.4% |
7.3% |
7.5% |
| CapitaLand Ascendas REIT |
CLAR SP |
Add |
2.69 |
3.10 |
\$9,163 |
38.9% |
2.20 |
1.22 |
5.7% |
5.9% |
6.1% |
| ESR-REIT |
EREIT SP |
Add |
0.36 |
0.28 |
\$1,405 |
42.8% |
0.28 |
8.22 |
1.0% |
1.0% |
1.0% |
| Frasers Logistics & Commercial Trust |
FLT SP |
Add |
0.87 |
1.11 |
\$2,519 |
36.1% |
1.08 |
0.80 |
6.6% |
6.2% |
6.3% |
| Keppel DC REIT |
KDCREIT SP |
Add |
1.93 |
2.48 |
\$3,841 |
30.2% |
1.53 |
1.26 |
4.5% |
4.7% |
4.9% |
| Mapletree Industrial Trust |
MINT SP |
Add |
2.04 |
2.56 |
\$4,502 |
40.1% |
1.71 |
1.19 |
6.7% |
6.5% |
6.5% |
| Mapletree Logistics Trust |
MLT SP |
Add |
1.13 |
1.63 |
\$4,432 |
40.7% |
1.31 |
0.86 |
7.1% |
6.6% |
6.6% |
| Stoneweg European REIT |
SERT SP |
Add |
0.77 |
1.93 |
\$968 |
42.9% |
1.98 |
0.39 |
8.7% |
8.9% |
9.3% |
| Sabana Shariah |
SSREIT SP |
NR |
0.36 |
NA |
\$291 |
37.4% |
0.50 |
0.72 |
0.0% |
0.0% |
0.0% |
| Simple Average |
|
|
|
|
\$3,152.89 |
38.1% |
1.43 |
1.80 |
5.3% |
5.2% |
5.3% |
| Office |
|
|
|
|
|
|
|
|
|
|
|
| Keppel REIT |
KREIT SP |
Add |
0.87 |
1.08 |
\$2,598 |
42.1% |
1.24 |
0.70 |
6.3% |
6.6% |
6.8% |
| OUE REIT |
OUEREIT SP |
Add |
0.29 |
0.33 |
\$1,236 |
40.6% |
0.59 |
0.49 |
6.9% |
7.3% |
7.6% |
| Suntec REIT |
SUN SP |
Hold |
1.14 |
1.26 |
\$2,592 |
43.4% |
2.01 |
0.57 |
5.5% |
5.8% |
6.1% |
| Simple Average |
|
|
|
|
\$2,142.00 |
42.0% |
1.28 |
0.59 |
6.2% |
6.6% |
6.8% |
| Retail |
|
|
|
|
|
|
|
|
|
|
|
| CapitaLand Integrated Commercial |
CICT SP |
Add |
2.10 |
2.45 |
\$11,889 |
38.7% |
2.09 |
1.00 |
5.3% |
5.6% |
5.9% |
| Frasers Centrepoint Trust |
FCT SP |
Add |
2.28 |
2.70 |
\$3,569 |
38.6% |
2.22 |
1.03 |
5.3% |
5.5% |
5.6% |
| Lendlease Global Commercial REIT |
LREIT SP |
Add |
0.52 |
0.69 |
\$975 |
40.8% |
0.74 |
0.70 |
7.7% |
7.7% |
7.8% |
| Mapletree Pan Asia Commercial Trust |
MPACT SP |
Add |
1.20 |
1.48 |
\$4,893 |
37.7% |
1.78 |
0.67 |
6.7% |
6.9% |
7.1% |
| Paragon REIT |
PGNREIT SP |
Hold |
0.98 |
0.98 |
\$2,143 |
35.3% |
0.92 |
1.07 |
5.2% |
5.4% |
5.6% |
| Starhill Global REIT |
SGREIT SP |
Add |
0.50 |
0.60 |
\$880 |
36.2% |
0.69 |
0.72 |
7.3% |
7.4% |
7.5% |
| Simple Average |
|
|
|
|
\$4,058.17 |
37.9% |
1.41 |
0.86 |
6.2% |
6.4% |
6.6% |
| Overseas-centric |
|
|
|
|
|
|
|
|
|
|
|
| CapitaLand China Trust |
CLCT SP |
NR |
0.68 |
NA |
\$916 |
42.6% |
1.09 |
0.62 |
8.4% |
8.5% |
8.6% |
| Elite UK REIT |
ELITE SP |
Add |
0.30 |
0.35 |
\$232 |
43.0% |
0.40 |
0.74 |
10.0% |
10.0% |
10.0% |
| Manulife US REIT |
MUST SP |
Add |
0.06 |
0.13 |
\$112 |
60.8% |
0.23 |
0.27 |
0.0% |
43.8% |
50.8% |
| Sasseur REIT |
SASSR SP |
Add |
0.65 |
0.85 |
\$627 |
24.8% |
0.83 |
0.78 |
9.5% |
9.9% |
10.2% |
| Simple Average |
|
|
|
|
\$471.75 |
42.8% |
0.64 |
0.60 |
7.0% |
18.0% |
19.9% |
| Healthcare |
|
|
|
|
|
|
|
|
|
|
|
| Parkway Life REIT |
PREIT SP |
Add |
4.25 |
4.91 |
\$2,146 |
36.1% |
2.42 |
1.76 |
3.6% |
4.0% |
4.1% |
Financial Summary
The report provides a detailed financial summary and key ratios for FLCT.
Profit & Loss (S\$m)
|
Sep-23A |
Sep-24A |
Sep-25F |
Sep-26F |
Sep-27F |
| Rental Revenues |
420.8 |
446.7 |
451.8 |
465.4 |
482.7 |
| Other Revenues |
|
|
|
|
|
| Gross Property Revenue |
420.8 |
446.7 |
451.8 |
465.4 |
482.7 |
| Total Property Expenses |
(105.8) |
(124.7) |
(131.2) |
(132.6) |
(135.8) |
| Net Property Income |
315.0 |
322.0 |
320.7 |
332.9 |
346.9 |
| General And Admin. Expenses |
|
|
|
|
|
| Management Fees |
(38.5) |
(37.6) |
(35.1) |
(35.6) |
(36.0) |
| Trustee’s Fees |
(0.9) |
(0.8) |
(1.4) |
(1.4) |
(1.4) |
| Other Operating Expenses |
(5.3) |
(4.7) |
(4.7) |
(4.8) |
(5.0) |
| EBITDA |
270.2 |
278.9 |
279.5 |
291.1 |
304.5 |
| Depreciation And Amortisation |
|
|
|
|
|
| EBIT |
270.2 |
278.9 |
279.5 |
291.1 |
304.5 |
| Net Interest Income |
(45.1) |
(63.7) |
(73.9) |
(76.9) |
(78.4) |
| Associates’ Profit |
|
|
|
|
|
| Other Income/(Expenses) |
|
|
|
|
|
| Exceptional Items |
(337.0) |
(40.8) |
0.0 |
0.0 |
0.0 |
| Pre-tax Profit |
(111.9) |
174.4 |
205.7 |
214.2 |
226.1 |
| Taxation |
6.6 |
(23.7) |
(23.6) |
(24.2) |
(25.2) |
| Minority Interests |
2.3 |
(3.2) |
(8.4) |
(8.5) |
(8.7) |
| Preferred Dividends |
|
|
|
|
|
| Net Profit |
(103.0) |
147.5 |
173.7 |
181.4 |
192.2 |
| Distributable Profit |
262.3 |
255.5 |
216.2 |
205.1 |
208.3 |
Cash Flow (S\$m)
|
Sep-23A |
Sep-24A |
Sep-25F |
Sep-26F |
Sep-27F |
| Pre-tax Profit |
(111.9) |
174.4 |
205.7 |
214.2 |
226.1 |
| Depreciation And Non-cash Adj. |
45.1 |
63.7 |
73.9 |
76.9 |
78.4 |
| Change In Working Capital |
6.2 |
28.7 |
4.5 |
0.1 |
1.2 |
| Tax Paid |
6.6 |
(23.7) |
(23.6) |
(24.2) |
(25.2) |
| Others |
403.5 |
70.6 |
14.0 |
14.2 |
12.5 |
| Cashflow From Operations |
349.6 |
313.7 |
274.3 |
281.3 |
293.0 |
| Capex |
(161.3) |
(88.2) |
(10.0) |
(10.0) |
(10.0) |
| Net Investments And Sale Of FA |
31.2 |
(177.4) |
(140.3) |
0.0 |
0.0 |
| Other Investing Cashflow |
|
|
|
|
|
| Cash Flow From Investing |
(130.0) |
(265.6) |
(150.3) |
(10.0) |
(10.0) |
| Debt Raised/(repaid) |
78.0 |
264.5 |
140.3 |
0.0 |
0.0 |
| Equity Raised/(Repaid) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
| Dividends Paid |
(271.0) |
(262.6) |
(216.2) |
(205.1) |
(208.3) |
| Cash Interest And Others |
(50.4) |
(70.1) |
(73.9) |
(76.9) |
(78.4) |
| Cash Flow From Financing |
(243.3) |
(68.2) |
(149.7) |
(282.0) |
(286.6) |
| Total Cash Generated |
(23.8) |
(20.0) |
(25.7) |
(10.8) |
(3.7) |
| Free Cashflow To Firm |
221.1 |
50.1 |
127.7 |
274.1 |
284.3 |
| Free Cashflow To Equity |
252.4 |
248.9 |
190.5 |
194.3 |
204.6 |
Balance Sheet (S\$m)
|
Sep-23A |
Sep-24A |
Sep-25F |
Sep-26F |
Sep-27F |
| Total Investments |
6,649 |
6,928 |
7,079 |
7,089 |
7,099 |
| Intangible Assets |
0 |
0 |
0 |
0 |
0 |
| Other Long-term Assets |
80 |
30 |
30 |
30 |
30 |
| Total Non-current Assets |
6,729 |
6,959 |
7,109 |
7,119 |
7,129 |
| Total Cash And Equivalents |
153 |
134 |
107 |
95 |
91 |
| Inventories |
|
|
|
|
|
| Trade Debtors |
42 |
30 |
30 |
31 |
33 |
| Other Current Assets |
14 |
15 |
15 |
15 |
15 |
| Total Current Assets |
208 |
178 |
152 |
141 |
138 |
| Trade Creditors |
65 |
93 |
97 |
99 |
101 |
| Short-term Debt |
523 |
557 |
557 |
557 |
557 |
| Other Current Liabilities |
21 |
18 |
24 |
24 |
25 |
| Total Current Liabilities |
609 |
668 |
678 |
680 |
683 |
| Long-term Borrowings |
1,633 |
1,856 |
1,996 |
1,996 |
1,996 |
| Other Long-term Liabilities |
270 |
291 |
291 |
291 |
291 |
| Total Non-current Liabilities |
1,903 |
2,147 |
2,287 |
2,287 |
2,287 |
| Shareholders’ Equity |
4,380 |
4,270 |
4,234 |
4,224 |
4,219 |
| Minority Interests |
45 |
53 |
61 |
69 |
78 |
| Preferred Shareholders Funds |
|
|
|
|
|
| Total Equity |
4,425 |
4,322 |
4,295 |
4,293 |
4,297 |
Key Ratios
|
Sep-23A |
Sep-24A |
Sep-25F |
Sep-26F |
Sep-27F |
| Gross Property Revenue Growth |
(6.53%) |
6.16% |
1.15% |
3.01% |
3.71% |
| NPI Growth |
(9.70%) |
2.22% |
(0.41%) |
3.80% |
4.22% |
| Net Property Income Margin |
74.9% |
72.1% |
71.0% |
71.5% |
71.9% |
| DPS Growth |
(7.6%) |
(3.4%) |
(16.0%) |
(5.6%) |
1.0% |
| Gross Interest Cover |
5.78 |
4.25 |
3.61 |
3.65 |
3.82 |
| Effective Tax Rate |
0.0% |
13.6% |
11.5% |
11.3% |
11.2% |
| Net Dividend Payout Ratio |
NA |
173% |
124% |
113% |
108% |
| Current Ratio |
0.34 |
0.27 |
0.22 |
0.21 |
0.20 |
| Quick Ratio |
0.34 |
0.27 |
0.22 |
0.21 |
0.20 |
| Cash Ratio |
0.25 |
0.20 |
0.16 |
0.14 |
0.13 |
| Return On Average Assets |
(1.44%) |
2.10% |
2.41% |
2.50% |
2.65% |
Key Drivers
|
Sep-23A |
Sep-24A |
Sep-25F |
Sep-26F |
Sep-27F |
| Net lettable area (sqm) |
2,681,031.4 |
2,764,815.3 |
2,883,001.3 |
2,883,001.3 |
2,883,001.3 |
| AUM (S\$m) |
6,649.5 |
6,928.4 |
7,078.7 |
7,088.7 |
7,098.7 |
Recommendation Framework and Rating Distribution
CGS International employs a recommendation framework based on expected total return over the next 12 months.
- Add: Total return expected to exceed 10%.
- Hold: Total return expected to be between 0% and positive 10%.
- Reduce: Total return expected to fall below 0%.
Total expected return combines the percentage difference between the target price and current price with the forward net dividend yields. Stock price targets have a 12-month investment horizon.
Sector and Country Ratings are market cap-weighted based on absolute recommendations within those categories.
- Overweight: Positive absolute recommendation (stocks or country positioning).
- Neutral: Neutral absolute recommendation.
- Underweight: Negative absolute recommendation (stocks or country positioning).
For the quarter ended 31 March 2025, covering 551 companies, the distribution of stock ratings and investment banking clients was:
| Rating Distribution (%) |
Investment Banking clients (%) |
| Add 71.0% |
1.3% |
| Hold 20.9% |
0.7% |
| Reduce 8.2% |
0.4% |
