He also highlights that FLT recycled the capital by purchasing two properties at Burilda Close in New South Wales and Wayne Goss Drive in Queensland, each with a respective net property income (NPI) yield of 6.1% and 6.8%, for an aggregate of A$62.6 million.
“The NSW property has a remaining land tenure of 88.9 years (as at 30 Jun 2018) and WALE of 7.0 years with 100% occupancy. For the Queensland property, it sits on freehold land, has a WALE of 4.2 years and is also fully occupied. The average fixed annual rental increments are 3.1% and 3.0% for the NSW and Queensland properties, respectively, while the average property age is one year,” observes Wong.
Going forward, the analyst estimates the trust has debt headroom of about A$190 million before reaching the 40% mark, considering his 36.2% end-FY18F aggregate leverage projection for FLT.
In his view, Australia’s robust 2Q GDP growth and firm household consumption are healthy indicators for the logistics sector.
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“As wage growth and inflation has remained soft, the Reserve Bank of Australia recently kept its cash rate unchanged at 1.5%. This is aimed at supporting sustainable growth in the economy and to achieve its inflation target over time. We believe this would also provide a favourable funding environment in the near-term for FLT to pursue more acquisitions,” says Wong.
Units in FLT were 1 cent higher at $1.07, or 7.1 times FY18F DPU, before the midday trading break.
