My Personal Analysis of Frasers Industrial Thailand REIT (SET:FTREIT)

Frasers Property Logistics Park (Bangna)

I will like to share my personal analysis of Frasers Industrial Thailand REIT.

Frasers Industrial Thailand REIT (FREIT) is an Industrial and Logistics Trust established on 12th December 2014 to manage industrial and logistics properties throughout Thailand with gross leasable area of approximately 2.03 million square metres. It is currently the biggest industrial and logistics REITs in Thailand.

Frasers Industrial Thailand REIT manages an estimated of 636 units that are widely scattered in 30 industrial and logistics prime areas in Thailand with a total property fair value of  44,137.5 million Baht.

Frasers Industrial Thailand REIT is listed on the Stock Exchange of Thailand (SET) whereby the initial date of trading was 9 January 2015.

Frasers Industrial Thailand REIT Portfolio

Frasers Industrial Thailand REIT’s investment portfolio comprises of 636 units of factories and warehouses. These units are high-quality properties strategically located in key industrial areas of Thailand such as Ayutthaya, Pathum Thani, Samut Prakan, Prachinburi and the Eastern Economic Corridor (EEC).

Frasers Industrial Thailand REIT Property Breakdown 20 June 2021

Let us look at the properties in more details.

Project Freehold Leasehold No. of units Net leasable area
(sq.m.)
Factory 337 863,885
Bangpa-in Industrial Estate 100% 15 32,300
Hi-Tech Industrial Estate (Ban Wah) 88% 12% 40 111,828
Rojana Industrial Park 92% 8% 61 145,732
Navanakorn Industrial Promotion Zone 91% 9% 23 56,500
Bangpoo Industrial Estate 100% 13 40,325
Amata City Chonburi Industrial Estate 90% 10% 103 271,225
Amata City Rayong Industrial Estate 78% 22% 38 100,400
Hemraj Industrial Estate (Bowin) 100% 3 7,200
Pinthong Industrial Estate (Project 1) 100% 19 39,250
Pinthong Industrial Estate (Project 2) 59% 41% 9 21,025
Pinthong Industrial Estate (Project 3) 87% 13% 13 38,100

From the above, there is one interesting thing I have found. In Thailand, some industrial complexes are called “industrial estates”, whereas others are called ‘”industrial parks”. Do you know the differences?

The term “industrial estate” can only be used by estates belonging to or jointly developed with the Industrial Estate Authority of Thailand (IEAT). IEAT is a state enterprise established by the Ministry of Industry to develop more planned and regulated industrial complexes.

Under IEAT, the customers can enjoy special privileges like consolidated, efficient document processing and perhaps most importantly, the right to 100% foreign ownership of land. As you can see, a lot of properties under Frasers Industrial Thailand REIT is termed “industrial estate”. This reflects the underlying quality of the assets which in turn attracts investors.

Project Freehold Leasehold No. of units Net leasable area
(sq.m.)
Warehouse 299 1,166,511
Frasers Property Logistic Center (Rojana) 100% 3 18,324
Frasers Property Logistic Center (Wang Noi 1) 100% 13 67,306
Frasers Property Logistic Center (Wang Noi 2) 100% 8 19,600
Cold Storage (CTD) 100% 1 18,354
Frasers Property Logistic Center (Bangplee 1) 100% 10 76,477
Frasers Property Logistic Center (Bangplee 2) 100% 9 124,634
Frasers Property Logistic Center (Bangplee 3) 100% 28 106,692
Frasers Property Logistic Center (Rojana Prachinburi) 100% 8 14,832
Frasers Property Logistic Center (Bangna) 31% 69% 82 258,260
Frasers Property Logistic Center (Amata City) 100% 7 19,650
Frasers Property Logistic Center (Sriracha) 100% 22 99,789
Frasers Property Logistic Center (Phan Thong) 100% 5 10,600
Frasers Property Logistic Center (Laemchabang 1) 100% 21 69,404
Frasers Property Logistic Center (Laemchabang 2) 100% 26 81,700
Frasers Property Logistic Center (Laemchabang 3) 100% 24 80,012
Frasers Property Logistic Center
(Eastern Seaboard 1 A)
100% 7 35,430
Frasers Property Logistic Center
(Eastern Seaboard 1 B)
100% 12 28,968
Frasers Property Logistic Center
(Eastern Seaboard 2 A)
100% 4 15,800
Hemraj Industrial Estate (Bowin) 100% 9 20,700

Many of the warehouses such as Frasers Property Logistic Centers are located near the Suvarnabhumi Airport, Bangkok Port and Laemchabang Deep Seaport.

The assets are strategically located in prime locations either near seaports or airport.

Occupancy

As of Q2FY21, the average portfolio occupancy stood at 86.3%. In my opinion, the occupancy is still not at optimum levels as my expectation is above 90%. Nevertheless, I can see that overall portfolio occupancy is improving as compared to the 1st quarter of 2021.

Frasers Industrial Thailand REIT Occupancy Q2FY21

The tenant base is well-diversified with no single tenant accounting for more than 10.0% of portfolio Gross Rental Income (GRI).

It is noteworthy that 30% of the tenants are from the Logistics sector and 41% of the tenants are Japanese.

Frasers Industrial Thailand REIT Tenant Mix 2Q2021

Weight Average Lease Expiry (WALE) stood at 2.1 years. Unless a step up rent component is incorporate in, I consider the WALE to be rather short.

Financial Summary

If we compare the gross revenue in 1H2021 and 1H2020, it grew by 10% to $1,674 million baht.

I realise Frasers Industrial Thailand REIT like to use Net Investment Income instead of Net Property Income which is commonly used in Singapore REITs. There is a difference between Net Investment Income and Net Property Income.

Net Property Income is the Gross Revenue of a Property minus the Property Related Expenses such as building maintenance etc.

Net Investment Income refers to income receive from investment assets such as stocks, bonds, funds and property before taxes are accounted for.

In the case of Frasers Industrial Thailand REIT, I am uncertain if all income comes solely from the leasing of its property as I could not find any information about it. I prefer investment income to be differentiated from property leasing income so that I can better evaluate the worth of its properties.

1H2021
THB million
1H2020
(THB million)
Change
Gross Revenue 1,674 1,674 10.0%
Net Investment Income 1,155.9 997 15.9%
Distributable Income 1,146 1,001 14.0%
Distribution Per Unit (“DPU”) (baht) 0.3360 0.334 0.6%

Distribution History

The distribution per unit for each quarter is rather consistent. In my opinion , DPU growth is lack lustre with only 0.6% year-on-year.

Frasers Industrial Thailand REIT Distribution Per Unit

Debt

As of 31st December 2020, gearing ratio stood at low level of 26.1%.

There is still a huge debt headroom of THB 15,433.0 million. This means there is plenty of room for further acquisitions.

Management

The first thing I wish to highlight is that Frasers Industrial Thailand REIT has a good sponsor which is Frasers Property (Thailand) Public Company Limited (FPT).

The following is extracted directly from Frasers Property Industrial REIT website.

Mr. Peerapat Srisukont is the Director and Managing Director. Mr Peerapat has been Managing Director of Frasers Property Industrial REIT Management (Thailand) Co., Ltd. since August 2016.

As Managing Director, he oversees overall operations of the REIT manager, sets the strategic objectives for Frasers Industrial Thailand REIT, create engagement with stakeholders and gives advice to management. He reports the operations of Frasers Industrial Thailand REIT to The Board of Directors of the REIT Manager.

He has more than 20 years’ experience in Industrial and logistics property management. He oversaw the conversion of three property funds, TFUND, TLOGIS and TGROWTH, into Frasers Industrial Thailand REIT, making Frasers Industrial Thailand REIT become “the largest industrial and logistics REIT in Thailand”.

Current Valuation

Based on FY20 Distribution Per Unit (DPU) of 0.6690 baht and current share price of 14.10 THB, this translate to a current dividend yield of 4.74%.

Are we late in the game already? If we bought at 12 baht 3 months ago, this will give us a dividend yield of 5.58% which is still satisfying for a dividend investor.

FTREIT Share Price 18 June 2021

Summary of My Analysis of Frasers Industrial Thailand REIT

Personally, I felt that this is a quality REIT whereby you are focusing on investing in Thailand’s Industrial and Logistics assets.

You might ask me “Why Thailand?” In my opinion, Thailand is an unexplored territory whereby there is a lot of value that can be unlocked there.

For example, the rising cost of electricity and leases in Singapore have driven companies to setup their factories and warehouses elsewhere. Thailand provided such matching conditions such as cheaper electricity and land leases as compared to Singapore.

In summary, the positives of Frasers Industrial Thailand REIT are

  • It is the biggest industrial and logistics REITs in Thailand.
  • The assets are strategically located in prime locations either near seaports or airport.
  • Underlying quality of the assets under IEAT attracts investors.
  • Huge debt headroom of THB 15,433.0 million. This means there is plenty of room for further acquisitions.

What I did not like about Frasers Industrial Thailand REIT are

  • Low average portfolio occupancy rate of 86.3%.
  • Short WALE of 2.1 years.
  • Low current dividend yield of 4.74% at share price of 14.10 THB.
  • Low Distribution Per Unit (DPU) growth of 0.6% year-on-year

That is all folks and I hope you like my personal analysis of Frasers Industrial Thailand REIT!