CGS International (CGSI) analysts Lock Mun Yee and Natalie Ong have maintained their “add” call on ESR-LOGOS REIT J91U (E-LOG), with an unchanged target price of 36 cents, even though the REIT’s 9MFY2024 ended Sept 30 numbers stood below their expectations.
In its interim business update, E-LOG reported a 6.3% and 6.5% y-o-y decline in 9MFY2024 gross revenue and net property income (NPI) to $272.5 million and $192.7 million, respectively, due to the divestment of non-core assets.
The revenue and NPI were below Lock and Ong’s expectations at 71% of their FY2024 estimates. The analysts have forecasted E-LOG to report revenue of $382.5 million in the FY2024 and NPI of $270.6 million.
On a same-store basis, gross revenue and NPI would have increased 1.9% and 1.2% y-o-y respectively, as a result of positive rental reversions.
That said, the analysts are remaining optimistic about E-LOG’s prospects as they believe the REIT’s portfolio rejuvenation strategy should result in more resilience to its income and net asset value (NAV) in the longer run. The strategy should also position the REIT to tap into inorganic growth opportunities, they add.
In their Oct 31 report, the analysts also note E-LOG’s “robust” portfolio rental reversions of 11% for the 9MFY2024 and “healthy” gearing of 36% as at the end of the 3QFY2024.
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They add that the REIT’s new 6% perpetual securities totalling $174.5 million issued in August 2024 to replace its existing 6.632% perpetual securities and finance its proposed acquisitions should result in some interest cost savings.
“For FY2025, management guided that it expects FY2025 revenue and NPI to be lifted by the contributions from the proposed acquisitions that were announced previously, positive rental reversions, as well as a service charge increment to offset cost increases from service contracts in FY2025,” they write.
As at 11.41am, units in E-LOG are trading 0.50 cents lower or 1.79% down at 27.5 cents.
