On 4th February 2025, Frasers Logistics and Commercial Trust shared their 1QFY25 business update. As usual, business updates mainly touched on operational performance with minimal updates on financial performance. Based on the above slide, the key highlights showed that Frasers Logistics and Commercial Trust maintained its positive portfolio rental reversions +21.3% on an incoming rent versus outgoing rent basis (“incoming vs outgoing”) and +41.8% for the average rent of the new/renewal lease as compared to the average rent of the preceding lease (“average rent vs average rent”).
Do you know why is positive rental reversion important? Positive rental reversions mean that there is an estimated increase in rent upon lease renewal, especially when the existing gross rent is below the estimated rental value. Positive rental reversions contribute to improved income and stability.
Frasers Logistics and Commercial Trust 1QFY25 Debt
As observed from the key highlights, Frasers Logistics and Commercial Trust’s aggregate leverage stood at 36.2%. Aggregate leverage, also known as gearing ratio, refers to the ratio of a real estate investment trust’s (REIT) debt to its total assets. In Singapore, Singapore REITs have a gearing limit of 50%. Frasers Logistics and Commercial Trust’s gearing of 36.2% is still below S-REIT’s gearing limit.
The increase in aggregate leverage was due to additional debt taken on to fund the acquisition of 2 Tuas South Link 1 in Singapore, distribution payments, lastly the impact of weaker foreign currencies against the Singapore dollar.
70.9% of its borrowings are hedged at fixed rates to mitigate against the risk of sudden interest rate hikes. REITs often use debt to fund acquisitions. If interest rates rise, the cost of servicing their debt increases, affecting profitability. Thus, it is important REITs hedged some of their borrowings at fixed rates to mitigate against the risk of sudden interest rate hikes.
Occupancy
Frasers Logistics and Commercial Trust’s overall portfolio occupancy stood healthy at 94.3%. The occupancy of its logistics and industrial segment had improved to 99.6% but its commercial segment had fallen from 87.5% in FY24 to 85.5% in 1QFY25. The decline in occupancy in 357 Collins Street is mainly due to the non-renewal of Service Stream which vacated in December 2024.
Lease Expiry
Lease expiry remains well-spread. Logistics and Industrial portfolio’s WALE (Weighted Average Lease Expiry) stood at 4.6 years while its commercial portfolio’s WALE stood at 4.5 years.
Frasers Logistics and Commercial Trust maintained its positive portfolio rental reversions +21.3% on an incoming rent versus outgoing rent basis (“incoming vs outgoing”) and +41.8% for the average rent of the new/renewal lease as compared to the average rent of the preceding lease (“average rent vs average rent”).
Do you know what is rental reversion? Rental reversion refers to the change in rental rates when leases are renewed. A positive rental reversion means the new rental rate is higher than the previous rate. A negative rental reversion happens when the new rental rate is lower than the previous rate. Whether the rental reversion is positive or negative depends on the market demand and supply.
What is Frasers Logistics and Commercial Trust’s Current Share Price and Dividend Yield?
As you can see from the above, Frasers Logistics and Commercial Trust share price is on a downtrend and closed at S$0.86 on Friday, 21st February 2025. Based on FY24 full year distribution of 6.80 cents and Frasers Logistics and Commercial Trust share price of S$0.86, this translates to a current dividend yield of 7.91%.
Summary of Frasers Logistics and Commercial Trust 1QFY25 Business Update
Let me summarize the pros and cons based on Frasers Logistics and Commercial Trust 1QFY25 business updates.
The pros are:
- Frasers Logistics and Commercial Trust maintained its positive portfolio rental reversions.
- Gearing continued to stand healthy at 36.2%.
- Overall portfolio occupancy is still healthy at 94.3%.
- High current dividend yield at 7.91%.
The cons are:
- Commercial segment’s occupancy fell to 85.5% due to non-renewal of Service Stream which vacated 357 Collin Street.
- Frasers Logistic and Commercial Trust’s share price is on a 6-months downtrend.
- Weakened AUD, EUR and GBP against Singapore Dollar.