(Image source: Frasers Logistics and Industrial Trust prospectus)
Looking at the profit and loss statement, I'll be using the pro forma financial statements provided in the prospectus. The distributable income looks so-so, with around $0.05 per unit (I'll use a A$1 = S$1 exchange rate, while the prospectus uses a A$1 = S$0.99 exchange rate), translating to a ~18 P/E ratio, not particularly low for a REIT. Also, some of its income is from tax related and other adjustments and I couldn't find any information on it in the notes as to why it's positive and removing that, the P/E ratio goes up to around 25, which is quite high for any company. Maybe I'm worrying too much about this though, since it could be a refund of its tax paid in Singapore since its a REIT. It also doesn't have a large amount of fair value gains like some other REITs that increase the earnings of the company, it's fair value adjustments are negative.
The balance sheet seems quite safe with a low net gearing ratio of 0.34 which is quite low for a REIT. But the REIT offer price is above book value, which is uncommon among REITs now, which makes it comparatively expensive. Given that its return on equity doesn't seem particularly when looking at the above financial statements, the REIT would seem overpriced at its offer price given its P/B and P/E ratio.
I have nothing much to add for the cash flow statement, so moving on. The REIT seems to be fairly overpriced at its offer price, but given that the Australian dollar has fallen quite a fair bit due to the slump in commodity prices, its returns may increase when and if the Australian dollar does recover back to its original levels, but this may take quite a while given Australia's exposure to the commodity business and that commodity prices don't seem to be recovering. But the REIT seems to be able to maintain its income due to a Weighted Average Lease Expiry (WALE) of 6.9 years
While the REIT may have a stable income stream with its long WALE and have some upside with foreign exchange, but I don't think I'll be investing in the REIT as for the time being, its offer price is quite high relative to other REITs and also the currency upside may turn out to be a downside so I wouldn't really count on it to push up the returns of the investment.
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