Should You Invest In Daiwa House Logistic Trust [Fundamental Analysis]

In this article, we'll be conducting a fundamental analysis of Daiwa House Logistic Trust and its suitability to achieve the following investment objective: To deliver a stable dividend yield of 5% to 6% per year while having a high degree of capital preservation ability.

Information Is Accurate Up To March 24

Business Description

Daiwa House Logistic Trust is an industrial REIT that was listed in 2018 and owns 4 outlet malls in mainland China.

What I Like About Daiwa House Log:

Very strong sponsor
High WALE and occupancy rate (Figure 11)
Tenants are largely focused on e-Commerce and third-party logistics sector in Japan which are resilient with much more room to grow domestically.

What I Do Not Like About Daiwa Hose Log:

Management is not proven given that the counter is only recently listed
Tenants are slightly concentrated with the top 10 tenants accounting for over 60% of the Net Property Income (Figure 12)

Updates From Recent Performance (FY 2023)

General Comments:

100% of borrowing is denominated in JPY – providing a natural hedge
Acquiring D project Tan Duc 2 in Vietnam and DPL Ibaraki Yuki in Japan in Dec 2023 and Jan 2024. The acquisition is funded via external debt financing. Post-acquisition, the gearing ratio is expected to be around 40.1%.
Achieved 100% portfolio occupancy rate

Positive Headwinds:

The acquisition of Ibaraki Yuki is expected to improve DPU by 1.2%
The acquisition of D Project Tan Duc 2 is expected to improve DPU by 1.9%
The restriction on overtime for truck drivers coming into effect from April 2024 in Japan, this is expected to create new demand for logistics facilities in the regional areas.

Negative Headwinds:

Borrowing cost is expected to increase as Japan’s central bank has decided to end its negative interest rate experiment. As such, we can expect the interest rate in Japan to increase moving forward. (Figure 13)
Further weakening of the Japanese Yen against a stronger SGD might result in lower DPU as a result of FX impact.

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- Work In Progress -

Daniel is a Licensed Independent Financial Consultant with MAS and a Certified Financial Planner (CFP®).

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