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Saturday, 18 June 2016

Frasers Logistics & Industrial Trust - Balloting Results

Frasers Logistics and Industrial Trust ("FLT") announced a strong set of subscription results where the offering was 6x subscribed. It is the largest IPO to-date with S$903m raised.

15 cornerstone investors took up ~48.6% of the units on offer and trading will start on 21 June 2016 at 9am.

"FLT's future growth is driven by a unique multi-pronged growth strategy, both organically through earnings upside from two pre-committed development properties and built-in annual rental increments; as well as Sponsor-driven, inorganic growth from the acquisition of three Call Option Properties, which have been 100.0% pre-committed to incoming tenants. Going forward, we intend to actively manage and enhance the REIT's portfolio to provide stable and growing distributions for our Unitholders." 

The balloting table for the public offering of FLT is presented below. It is very well subscribed. While investors who applied for shares will definitely get "some allocation", the number allocated is definitely well below what investors subscribed for. 

Given the 'hotness', the IPO should debut well unless it is "derailed" by Brexit sentiments. 

I understand from sources that this IPO is very well subscribed by HNWIs from private banks and were provided 50% leverage on them.

Good luck to those who subscribed :)

Thursday, 16 June 2016

Frasers Logistics & Industrial Trust ("FLT")

Pardon the late and brief analysis as currently tied up with a live deal

Frasers launched its logistics and industrial trust with a public offering of 80m units at $0.89 per unit. It is a pure play Australian industrial REIT with an initial portfolio of 51 Australian industrial assets and a market cap of approximately S$1.268b. The IPO will close on 16 June 2016 at 12pm and starts trading on 21 June 2016 and 9am.

According to this report, its placement tranche was about 6x subscribed and has been priced at the top end of its offering range. Investors in FLT will also benefit from the three call option on properties from its Sponsor.

Initial Portfolio
The Initial Portfolio of 51 properties are all located in Australia and will increase to 54 properties once the call option is exercised.

Distribution Yield

The yield improved from FP2016 to PY2017 came primarily from the call options on the properties which will improve the yield from 6.9% to 7.30%. While some investors may consider this as "financial engineering", it is legitimate as it comes from acquisitions and this can only happen if you have a Sponsor with many assets

What I like about the REIT
  • Alignment of interest between Sponsor, Manager and Unitholders
  • Oversubscribed institutions tranche
  • Reputable sponsor with strong acquisition growth pipeline
  • Properties are predominantly freehold and has long WALE (weighted average lease expiry)
  • Built in rental increments and potential upside from pre-committed development properties

Some of my concerns
  • Volatile market prior to the Brexit referendum on June 23rd and if Britain "leave" wins, it will create further turmoil in the market.
  • The Company's IPO is right smack in the Brexit week next Monday.
  • REITs already listed on exchange are offering higher yields ranging from 7.5% to 9.8%  
  • Potential dilution when acquistion happens
My Chilli ratings

I am sorry to disappoint you but this looks like an "ordinary" REIT with Australian only "assets".  Even though the institutional placement tranche is oversubscribed, there is ~$80m for the public tranche.

I will give it a one chill rating. Buy only if you are into REITs and would like an exposure in Australian assets. If you want to "flip or stag" on the first day, it will really depend on the market sentiments next Monday and watched the news on Brexit closely!  :)

Happy IPOing

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