Frasers Logistics and Commercial Trust Earnings: Distribution Miss as Manager Takes Fees in Cash

Frasers Logistics and Commercial Trust’s fiscal 2024 (ending September) distribution per unit came in below our expectation due to higher-than-expected borrowing costs and management opting to take all of its second-half management fees in cash instead of units. We have pushed back our lease-up assumptions for its UK business parks given the slow progress, raised our borrowing cost forecasts, and lowered our ratio of management fees taken in units to 50% from 70%. As a result, our fiscal 2025-27 DPUs are cut by 2.9%-6.2%. We kept our fair value estimate at SGD 1.14 per unit as our key assumptions for cap rate and rents remain unchanged. We think the units are currently fairly valued and expect the potential sale of FLCT’s shares by its sponsor, Frasers Property Limited, or FPL, to be an overhang in the near term.