CGS-CIMB Research analyst Lock Mun Yee is keeping her “add” call on ESR-LOGOS REIT (E-LOG) after the REIT posted its first results for the 1HFY2022 after its merger with ARA LOGOS Logistics Trust (ALOG).
Lock has kept her target price of 51 cents and her distribution per unit (DPU) estimates unchanged for the FY2022 to FY2024 in her report dated July 27.
That said, the analyst had increased her target price estimate to 51 cents from 47.4 cents in her previous July 25 report. At the time, Lock had increased her DPU estimates for the FY2022 and FY2023 respectively, while lowering her FY2024 DPU estimate by 0.81%.
To the analyst, the REIT is trading at an “attractive” FY2022 dividend yield of 7.15% at its current price of 42 cents per unit.
Further to her report, Lock is anticipating that E-LOG’s positive rental reversions that it had seen in the 1HFY2022 to continue, although the trajectory may moderate. The positive sentiment is given the robust demand outlook and upbeat rental market, she says.
On E-LOG’s asset enhancement initiatives (AEI), the REIT currently has six ongoing AEIs with another three properties that can potentially be upgraded.
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When completed, these are likely to be accretive to E-LOG’s net asset value (NAV) per unit and DPU, says Lock.
“With its sponsor ESR Group’s asset base of US$59 billion ($81.8 billion) and executable pipeline of US$2 billion of assets in Asia Pacific, E-LOG is also well-positioned to grow inorganically,” Lock writes.
The analyst is also positive on ESR Group’s acquisition of 654,546 shares in the E-LOG’s manager from Tong Jinquan.
“Post transaction, ESR will hold 90% of the shares in E-LOG’s manager and will also become the largest unitholder of E-LOG with a 14.4% stake in the REIT. We believe this is positive and demonstrates ESR’s commitment to E-LOG,” she says.
In her view, catalysts to the REIT’s unit price are accretive acquisitions, while slower-than-anticipated acquisitions and higher-than-projected interest rate hikes are downside risks.
As at 1.10pm, units in E-LOG are trading flat at 42 cents.
