FLCT’s Q1 Fiscal 2022 Business Update In Line; Active Portfolio Management To Drive Future Growth

Frasers Logistics & Commercial Trust, or FLCT’s, first-quarter fiscal 2022 (ending September) performance was generally in line with our expectations. Compared to the previous quarter, portfolio occupancy rate was slightly pulled down to 95.9% from 96.2% by its commercial portfolio that saw a 80 basis points decrease to 91.0%. This was due to lower occupancy rates in its Singapore commercial assets, such as Cross Street Exchange and Alexandra Technopark. That said, its logistics and industrial portfolio continues to demonstrate its resilience and remained 100% occupied. First-quarter fiscal 2022’s rental reversion for its industrial and logistics assets continues to remain in the negative region at negative 10.2%, as expiring Australian and German logistics and industrial leases are rebased to the lower market rates on renewal. On the other hand, FLCT’s commercial assets saw a positive 4.0% rental reversion due to its United Kingdom and Singapore assets clocking in strong positive 21.7% and 3.6% rental reversions, respectively, to offset the negative 37.2% reversion recorded in Australia. As these indicators are largely within our expectations, we maintain our fair value estimate at SGD 1.72 per unit and our no-moat and stable moat trend ratings are unchanged. We think the units are undervalued at the current price and we continue to like FLCT for its logistics exposure, which benefits from robust underlying demand from the strong secular tailwinds of e-commerce.