ESR-Logos REIT’s Q3 Results In Line; Active Portfolio Management To Drive Future Growth

ESR-Logos REIT delivered a strong third-quarter 2022 performance, with net property income jumping 59.2% year on year to SGD 69.9 million. This was largely within our expectations given the merger with ARA Logos Trust in April 2022. Other positive takeaways include another quarter of double-digit positive rental reversion of 11.4%. Notably, the trust secured the renewal of one of its top 10 tenants, Ams-Osram Asia Pacific, at a positive 12.9% rental reversion. However, portfolio occupancy declined slightly to 92.4% this quarter from 94.1% last quarter due to declining occupancy rates for its Singapore portfolio. That said, we noted that the trust’s Singapore portfolio’s occupancy of 90.4% remained above the market average occupancy rate of 90.0% (as reported by Jurong Town Council). We leave our fair value estimate of SGD 0.48 unchanged. ESR-Logos remains our preferred pick for industrial REITs as it is trading at an attractive 2023 distribution yield of 9% currently. This compares attractively against other industrial peers who are trading at 6%-6.75% 2023 distribution yields. In our view, ESR-Logos’ Singapore-centric portfolio would shield it from currency exchange risk, and we believe it provides better risk adjusted returns at the current price.