Frasers Logistics & Commercial Trust: Financial Analysis with Net Profit Decline

Business Description

Frasers Logistics & Commercial Trust (FLCT) is a Singapore-listed real estate investment trust with a diversified portfolio of 112 industrial and commercial properties worth approximately S\$6.8 billion. The portfolio spans five major developed markets: Australia, Germany, Singapore, the United Kingdom, and the Netherlands. FLCT focuses on logistics and industrial properties, along with commercial properties such as CBD and non-CBD office spaces and research and development business parks.

Industry Position

FLCT operates within the logistics and commercial real estate industry. It is positioned as a significant player with a diversified geographic footprint. Competitors in this sector include other REITs and property management firms with similar portfolios. FLCT has a competitive advantage through its strategic acquisitions and the resilience of its logistics and industrial portfolio.

Revenue Streams and Competitive Advantage

The company’s revenue streams are primarily derived from rental income from its diversified portfolio. The customer base includes tenants from various industries, providing a stable income stream. FLCT’s competitive advantage lies in its high portfolio occupancy, strategic acquisitions, and strong market presence in key developed markets.

Financial Statement Analysis

Income Statement

For FY2024, FLCT reported a revenue increase of 6.2%, reaching S\$446.7 million. Adjusted Net Property Income also increased by 2.7% to S\$320.0 million. However, Distributable Income declined by 2.6% to S\$255.5 million, and the Distribution Per Unit (DPU) decreased by 3.4% to 6.80 Singapore cents [[1]].

Balance Sheet

As of 30 September 2024, FLCT’s portfolio was valued at S\$6.8 billion. The net asset value per unit was S\$1.13. The company maintained a healthy aggregate leverage of 33.0% and an interest coverage ratio of 5.0 times [[2]].

Cash Flow Statement

FLCT’s cash flow from operations was impacted by higher finance costs due to increased interest rates and additional borrowings for capital expenditures and acquisitions. The cost of borrowings for FY2024 was 2.8% per annum [[3]].

Dividend

FLCT declared a DPU of 3.32 Singapore cents for 2HFY24, with a total DPU of 6.80 Singapore cents for FY2024 [[2]].

Key Findings

• Strengths: High portfolio occupancy of 94.5%, robust rental reversions in the logistics and industrial sector, strategic acquisitions in Germany and the Netherlands, and a strong balance sheet with a low leverage ratio.
• Risks: Decline in distributable income and DPU, higher vacancies in certain commercial properties, and increased finance costs due to rising interest rates [[1]][[2]].

Special Activities

FLCT completed the development of a logistics & industrial property in Ellesmere, North West England, and the façade replacement for Central Park in Perth. The company also announced the acquisition of a prime logistics property in Singapore to expand its logistics & industrial portfolio [[3]].

Investment Recommendations

For Current Investors

If you are currently holding FLCT stock, it is recommended to hold due to the company’s strong portfolio performance in the logistics and industrial sectors, despite the decrease in distributable income and DPU. The strategic acquisitions and developments suggest potential for future growth.

For Potential Investors

If you are not currently holding FLCT stock, it is recommended to consider buying, especially if seeking exposure to the logistics and industrial real estate market. The company’s strong market position and strategic acquisitions provide a compelling reason for investment.

Disclaimer

This analysis is based on the financial report for FY2024. The investment recommendations are based on the current financial performance and market conditions. Investors should conduct their own due diligence before making any investment decisions.

Report Date

The report date is 6 November 2024, covering the financial year ended 30 September 2024 [[1]].