Daiwa House Logistics Trust - Lower DPU due to higher interest expenses

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REITs

By Gerald Wong, CFA • 06 Mar 2026

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Daiwa House Logistics Trust (DHLT) reported 2H FY25 distribution per unit at 2.09 cents, down 10.4% year-on-year.

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Lower distribution per unit led by an increase in interest expense

Distribution per unit declined to 2.09 cents in 2H FY25, -10.4% year-on-year. Interest expense increased by 30.3% year-on-year in 2H FY25 due to elevated interest rate and additional loans drawdown to fund acquisition. In addition, vacancies increased at Sendai Port and Kawasaki Yako.

For the full year FY2025, DPU was 4.33 cents, a decline of 9.6% year-on-year. FY2025 DPU at 4.33 cents translated to a distribution yield of 8.0% based on the closing price of S$0.54 as at 5 March 2026.

Including the contribution from recently acquired DPL Gunma Fujioka and rental reversion on upcoming rental expiry, we estimate the distribution per unit to grow steadily in FY2026 and FY2027 to 4.43 cents and 4.51 cents, respectively.

Source : Company data, Beansprout research

Positive financial performance driven by accretive acquisition

2H FY25 revenue declined 3.0% year-on-year to S$28.6 million and Net property income down 4.3% year-on-year to S$21.7 million. The weaker performance was due to vacancies and unfavourable FX movements, partly cushioned by contribution from DPL Gunma Fujioka acquired in March 2025.

As a result, income to be distributed to unitholders declined 8.2% year-on-year to S$15.7 million in 2H FY25, with financing costs and currency effects weighing more heavily than the modest dip in topline.

Revenue rose by 1.2% year-on-year to S$57.8 million in FY2025, supported by contributions from DPL Gunma Fujioka and a full-year contribution from D Project Tan Duc 2. Furthermore, Daiwa House Logistics Trust achieved 11% in weighted average rent increase on the nine leases signed in FY2025.

Net property income edged up 0.7% to S$44.2 million, as acquisition gains were partly offset by vacancies and weaker foreign currencies.

Portfolio performance weakened due to lower occupancy

Asset under management (AUM) was marginally lower, -0.1% year-on-year at S$835.2 million, as at 31 December 2025. Despite valuation growth from newly acquired assets, portfolio valuation was lower due to weaker Japanese Yen and Vietnamese Dong against the Singapore Dollar.

Weighted average lease expiry (WALE) was unchanged at 6.6 years at 31 December 2025.

However, portfolio occupancy fell to 87.8% as at 31 December 2025, -9.8 percentage points from the previous year. That said, 16 of the 19 properties remained at 100% occupancy.

The current lease expiry profile is well spread out with 54% of the leases to expire in 2030 or later. This provides a stable income visibility to the unitholders.

Updates on leasing activities

For FY2025, Daiwa House Logistics Trust renewed or signed on new tenants for nine leases. These leases achieved weighted average rent uplift of approximately 11%. Due to the lease structure in Japan, the renewed or new leases signed could achieved rental revision of at least high single digit. Thus, for the leases expiring in 1H FY26, we expect a similar trend in rental reversion.

Portfolio occupancy fell to 87.8% as at 31 December 2025, compared with 92.0% as at 30 September 2025. This was due to lower occupancy rates at Sendai Port and Kawasaki Yako. Occupancy rates at Sendai Port fell to 31.9% as at 31 December 2025, from 50.% as at 30 September 2025.

For Sendai Port, only one of the four expired leases in 2H FY25 was leased out. For the remaining three units, the space will need to be reconfigured into smaller units to suit potential tenants. There is typically a two to three months downtime to backfill vacated space. Management will actively look to new tenants and rejig the units to meet their requirements.

Healthy balance sheet

As at 31 December 2025, total borrowings stood at S$356.7 million, with aggregate leverage at 40.2%, comfortably below the 50% regulatory limit. Interest coverage remained healthy at 5.5x including perpetual distributions and 6.2x excluding them, indicating solid debt servicing capacity.

The weighted average debt tenure was 2.9 years, providing reasonable visibility over refinancing needs. The maturity profile is well staggered, although two tranches are due in November and December 2026, which will be the next key refinancing window.

Funding costs remain low, with a weighted average borrowing cost of 2.04% on an all-in basis. Notably, 99.3% of debt is on fixed rates, limiting exposure to interest rate volatility and supporting earnings stability.

In FY2025, Daiwa House established a sustainability-linked loan framework, securing its first sustainability-linked loan for a S$30 million facility.

Maintain Neutral and target price at S$0.57

Daiwa House is trading at S$0.54, implying FY25 distribution yield of 8.0%. Based on our estimates, Daiwa House will offer a potential distribution yield of 8.2% for FY2026F.

In terms of PB ratio, Daiwa House is trading at Price to book value 0.83x, fairly reflecting the smaller scale. In comparison, CapitaLand Ascendas REIT and Mapletree Logistics Trust are trading at PB 1.14x and 0.98x.

We maintain Neutral on Daiwa House and expect a modest uplift in the distribution per unit in the next twelve months.

At S$0.54 the closing price on 5 March 2026, DHLT trades at FY2025 dividend yield 8.0%.

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