Initial take on ALOG, SUN results
? ALOG FY21 DPU of 5.03 Scts was in line, at 99.3% of our FY21F forecast, while SUN came in ahead at 103.4% of our FY21F estimate.
? ALOG benefited from strong demand for logistics assets, particularly in Australia, and achieved positive 3.1% rental reversion for FY21.
? Improvement in retail segment and new office contributions boosted SUN’s FY21 performance.
ALOG continued to see strong demand for logistics assets in FY21
ARA LOGOS Logistics Trust’s (ALOG) FY21 revenue increased 15.2% yoy to S$135.2m and NPI rose by 16.6% yoy to S$104.9m, driven by incremental revenue from the Australian portfolio acquisition (completed in Apr 2021) and stronger overall portfolio performance. This was partially offset by the divestments of Kidman Park in Australia and ALOG Changi DistriCentre 2 in Singapore. FY21 DPU was however 4.1% lower yoy at 5.034 Scts, in line at 99.3% of our full-year forecast, on the back of an enlarged unit base, following the equity raised for the maiden Australian portfolio acquisition from its sponsor, LOGOS, and the effect of the manager receiving 100% of 4QFY21 base management fee and FY21 performance fee in cash. ALOG continued to deliver stronger positive rental reversion of +3.1% in FY21 (+3.2% in 9M21), largely coming from Australia leases. Its portfolio occupancy improved from 97.6% in 3QFY21 to 99% in 4QFY21, boosted by both Singapore (+1.7% pts to 98.1%) and Australia (+0.9% pts to 99.7%). Gearing as at Dec 2021 remained stable at 39.5% vs. 39% in FY20 with all-in financing costs declining from 3.22% in FY20 to 2.77% in FY21. We expect the firm demand for logistics assets to continue to support the rental reversion of ALOG. Stronger growth would come from the merger with ESR REIT to create a larger entity, which would help to accelerate inorganic growth. Reiterate Add w ith an unchanged TP of S$0.978.
New acquisitions and better retail segment boost SUN income
SUN reported a 15.3% yoy rise in 2H21 gross revenue with higher contributions from its overseas assets in Australia and UK as well as improved performance at Suntec Mall due to lower rent assistance and higher gross turnover rent, partly offset by lower revenue from Suntec Convention and divestment of strata units at Suntec Office. 2H DPU of 4.51 Scts, +17.1% yoy, is slightly ahead of our projections at 53.4% of our FY21F forecast. Office NPI, including JV income, rose 16.5% yoy to S$163.5m in 2H21, mainly due to addition of Nova Properties and Minster Building in the UK, partly offset by lower occupancy at ORQ and MBFC Towers 1&2. Singapore office portfolio is 97.5% committed. SUN leased 719.6k sq ft of space for FY21 (134.3k sq ft in 4Q) at a positive reversion of +3.2%. SUN has 14% and 27.3% of Singapore office leases expiring in FY22F and FY23F, respectively. Retail NPI is 54.4% higher yoy to S$35.2m on increased occupancy, higher revenue and lower expenses, less provision and recovery of doubtful debt. Retail reversion came in at -14.4% in FY21 (-11.8% in 4Q21) as tenant sales continue to recover. Looking ahead, management forecasts mild positive office rent reversion in FY22F and improved retail revenue due to higher occupancy and higher turnover rents. Our current rating is Add with a DDM-based TP of S$1.79.