Frasers Logistics: Well Positioned to Grow Through Acquisitions; Business Parks to Drag Earnings

Frasers Logistics & Commercial Trust’s, or FLCT’s, first-quarter fiscal 2024 (ending September) business update was generally in line with our expectations. Compared with the previous quarter, the portfolio occupancy rate slightly declined to 95.8% from 96.0% due to lower occupancies at 357 Collins Street in Australia and Farnborough Business Park in the United Kingdom. Meanwhile, its logistics and industrial portfolio continues to remain 100% occupied, driven by favorable market demand and supply dynamics. First-quarter fiscal 2024’s rental reversion numbers came in very strong for its logistics and industrial portfolio at a positive 31.3%, while its commercial portfolio registered a positive 3.7%. As these indicators are largely within our expectations, we maintain our fair value estimate at SGD 1.14 per unit. Although we continue to like FLCT for its logistics exposure, which benefits from robust underlying demand supported by higher e-commerce penetration, we think the units are fairly valued at the current price.