Is Frasers Logistics & Commercial Trust A Good Buy In 2025? [Fundamental Analysis]

In this article, we'll conduct a fundamental analysis and review of Frasers Logistics & Commercial Trust and its suitability to achieve the following investment objective: To deliver a stable dividend yield of 5% to 6% per year while having high capital preservation ability.

Information Is Accurate Up To Jan 2025

Business Description

Frasers Logistics & Commercial Trust is an industrial and commercial REIT that was formed in 2020 as a result of the merger of Frasers Logistic Trust and Frasers Commercial Trust.

What I Like About FLCT:

The majority of the properties are either freeholds or have a long-remaining land lease of over 75 years.
Logistics and industrial properties are resilient and have high WALE
Prudent capital management strategy with low gearing, high levels of interest cover ratio and low cost of borrowing (Fig 4 & 5)
The tenant base is well diversified across different sectors and geography thereby presenting a low concentration risk to unitholders. The top 10 tenants accounted for 18.1% of L&I GR and 14.9% of Commercial GR.

What I Do Not Like About FLCT:

Exposure to foreign currencies, while inevitable, is a cause of concern, especially given the strength of the SGD against AUD & EUR.
Foreign offices and business park exposure, if any, is a drag on the overall performance (IMO the merger was not for the interest of investors, but it is what it is).

Updates From Recent Performance (FY 2024)

General Comments:

Gross Revenue and Net Property Income increased by 6.2% and 2.7% mainly due to the contributions from acquired properties.
DPU decreased by 3.4% due to higher operating & borrowing costs.
Ongoing challenges in the commercial property sector have resulted in a drag in performance as the occupancy rate decreased by 2.4%.
Aggregate leverage increased by 2.8% to 33% due to additional borrowings drawn for capital expenditure and acquisitions.

Positive Headwinds:

FLCT’s logistics and industrial properties is well positioned to benefit from the friendshoring trend at the back of a heighten global trade tension with Trump 2.0 presidency.
Demand for existing warehouse space remains strong due to the persistent low availability of supply while demand is expected to increase over the next 12 months.

Negative Headwinds:

Commercial property headwinds are expected to persist which is expected to continue to drag down the portfolio’s overall performance.

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