DBS Group Research has issued a report on Daiwa House Logistics Trust (DHLT), maintaining a ‘buy’ rating but slightly lowering the 12-month target price to SGD0.63 from the previous SGD0.65. This adjustment reflects the trust’s performance in the first half of 2025, where the distribution per unit (DPU) of 2.24 Singapore cents fell slightly below expectations due to foreign exchange movements.
DHLT, which owns a portfolio of 19 modern logistics facilities, continues to benefit from high occupancy rates and a healthy average rental uplift of approximately 10% in the first half of 2025. The trust’s recent acquisition of a high-quality logistics facility in Greater Tokyo is expected to generate an accretion of more than 3%, supporting its strategy to optimise gearing and pursue accretive acquisitions.
Despite the positive rental trends, DHLT faces challenges from a weak Japanese yen, impacting earnings. The trust’s gearing remains stable at 40.7%, with borrowing costs expected to rise slightly by the end of the year. However, DHLT’s strong operating fundamentals, including a long weighted average lease expiry of around six years, provide a solid foundation for future growth.
DBS Group Research’s revised target price is based on a discounted cash flow valuation method, implying a target yield of approximately 7.0%. The report highlights potential risks, including further weakening of the yen and increased gearing, but remains optimistic about DHLT’s prospects in the logistics property market in Japan.
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