Daiwa House Logistics Trust - Mixed outlook across portfolio of assets

Portfolio of assets predominantly in Japan

We initiate coverage on Daiwa House Logistics Trust (DHLT), a REIT with a portfolio of 18 high-quality modern logistics properties and  listed on the SGX since November 2021. 

DHLT’s primary focus is on investing in income-producing logistics and industrial real estate assets across Asia. 

The REIT’s portfolio has an appraised value of approximately S$836 million and a total Net Lettable Area (NLA) of 476,614 square meters. 

Given the relatively young age of the portfolio at 6.9 years, the portfolio enjoys a 97.6% occupancy rate as of 31 December 2024, and has maintained a consistently high portfolio occupancy rate since its IPO in 2021.

Rise in vacancy rates for logistics assets in Japan

While DHLT is exposed to the long term growth of the third-party logistics and e-commerce sectors, which accounted for 78.9% and 8.5% of its Gross Rental Income (GRI) respectively, there are near term headwinds from the rise in vacancy rates across logistics assets in Japan. 

According to CBRE, the vacancy rate for Large Multi-Tenant (LMT) logistics facilities in Greater Tokyo rose to 9.8% in 4Q 2024 from 9.3% in 4Q 2024, while the vacancy rate in Greater Nagoya rose to 13.4% in 4Q 2024 from 10.5% in 4Q 2023, with significant new supply in the market. 

With six leases representing up to 14% of portfolio NLA expiring in 1H 2025, there is near-term uncertainty on the impact to its distributions until new tenants are secured for the space expected to be vacated.

Strategic entry into Southeast Asia

The acquisition of D Project Tan Duc 2 in Vietnam, announced in December 2023 and completed in July 2024, marks DHLT's strategic entry into Southeast Asia, a region which had experienced significant foreign direct investment (FDI) growth. 

However, in light of the trade war, prospects of logistics facilities and DHLT’s growth opportunities in the region are now more uncertain. 

At 46%, Vietnam has been hit with one of the highest tariffs globally by the US, which is a huge blow to the attractiveness of investments into the country. In light of the uncertainties created by shifting trade tariffs from the US, FDI growth into Southeast Asia may slow as companies reassess their supply chain strategies.

Committed sponsor with strong track record

Daiwa House, the sponsor of DHLT, has demonstrated its commitment as a sponsor since the REIT’s listing in 2021 via (i) providing high quality properties for DHLT’s acquisition, at attractive discounts to valuation, (ii) providing funding support through subscription of units at a premium to market price and (iii) providing asset management and property management services to DHLT. 

Initiate with a Neutral rating

Following a 8.2% decline in distribution per unit (DPU) in 2024, we expect  DHLT’s DPU to remain under pressure in 2025, backdrop of a sizeable portion of its leases due for renewal in 1H25. 

We derived a target price of S$0.59 per unit based on a three-stage dividend discount model, on a cost of equity of 11% and terminal growth rate of 2%. 

Based on our forecasts, DHLT offers a FY25E distribution yield of 8.2%. 

Key risks include significant geographical exposure to Japan, as well as foreign currency risk if the Japanese Yen were to weaken further against the Singapore Dollar. 

Related links:

• Daiwa House Logistics Trust share price and share price target
• Daiwa House Logistics Trust dividend history and forecast

Click here to download the full report. 

Join the Beansprout Telegram group for the latest insights on Singapore stocks, REITs, bonds and ETFs. 

Important Disclosures

Analyst Certification and Disclosures 

The analyst(s) named in this report certifies that (i) all views expressed in this report accurately reflect the personal views of the analyst(s) with regard to any and all of the subject securities and companies mentioned in this report and (ii) no part of the compensation of the analyst(s) was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst herein. The analyst(s) named in this report (or their associates) does not have a financial interest in the corporation(s) mentioned in this report.

An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst.

Company Disclosure

Global Wealth Technology Pte Ltd (“Beansprout”) does not have any financial interest in the corporation(s) mentioned in this report.

Disclaimer

This report is provided by Beansprout for the use of intended recipients only and may not be reproduced, in whole or in part, or delivered or transmitted to any other person without our prior written consent. By accepting this report, the recipient agrees to be bound by the terms and limitations set out herein.

You acknowledge that this document is provided for general information purposes only. Nothing in this document shall be construed as a recommendation to purchase, sell, or hold any security or other investment, or to pursue any investment style or strategy. Nothing in this document shall be construed as advice that purports to be tailored to your needs or the needs of any person or company receiving the advice. The information in this document is intended for general circulation only and does not constitute investment advice. Nothing in this document is published with regard to the specific investment objectives, financial situation and particular needs of any person who may receive the information. 

Nothing in this document shall be construed as, or form part of, any offer for sale or subscription of or solicitation or invitation of any offer to buy or subscribe for any securities. The data and information made available in this document are of a general nature and do not purport, and shall not in any way be deemed, to constitute an offer or provision of any professional or expert advice, including without limitation any financial, investment, legal, accounting or tax advice, and shall not be relied upon by you in that regard. You should at all times consult a qualified expert or professional adviser to obtain advice and independent verification of the information and data contained herein before acting on it. Any financial or investment information in this document are intended to be for your general information only. You should not rely upon such information in making any particular investment or other decision which should only be made after consulting with a fully qualified financial adviser. Such information do not nor are they intended to constitute any form of financial or investment advice, opinion or recommendation about any investment product, or any inducement or invitation relating to any of the products listed or referred to. Any arrangement made between you and a third party named on or linked to from these pages is at your sole risk and responsibility. 

You acknowledge that Beansprout is under no obligation to exercise editorial control over, and to review, edit or amend any data, information, materials or contents of any content in this document. You agree that all statements, offers, information, opinions, materials, content in this document should be used, accepted and relied upon only with care and discretion and at your own risk, and Beansprout shall not be responsible for any loss, damage or liability incurred by you arising from such use or reliance. 

This document (including all information and materials contained in this document) is provided “as is”. Although the material in this document is based upon information that Beansprout considers reliable and endeavours to keep current, Beansprout does not assure that this material is accurate, current or complete and is not providing any warranties or representations regarding the material contained in this document. All opinions contained herein constitute the views of the analyst(s) named in this report, they are subject to change without notice and are not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this report. Any reference to past performance should not be taken as an indication of future performance. To the fullest extent permissible pursuant to applicable law, Beansprout disclaims all warranties and/or representations of any kind with regard to this document, including but not limited to any implied warranties of merchantability, non-infringement of third-party rights, or fitness for a particular purpose. 

Beansprout does not warrant, either expressly or impliedly, the accuracy or completeness of the information, text, graphics, links or other items contained in this document. Neither Beansprout nor any of its affiliates, directors, employees or other representatives will be liable for any damages, losses or liabilities of any kind arising out of or in connection with the use of this document. To the best of Beansprout’s knowledge, this document does not contain and is not based on any non-public, material information. The information in this document is not intended for distribution to, or use by, any person or entity in any jurisdiction where such distribution or use would be contrary to law or regulation, or which would subject Beansprout to any registration requirement within such jurisdiction or country. Beansprout is not licensed or regulated by any authority in any jurisdiction or country to provide the information in this document.

As a condition of your use of this document, you agree to indemnify, defend and hold harmless Beansprout and its affiliates, and their respective officers, directors, employees, members, managing members, managers, agents, representatives, successors and assigns from and against any and all actions, causes of action, claims, charges, cost, demands, expenses and damages (including attorneys’ fees and expenses), losses and liabilities or other expenses of any kind that arise directly or indirectly out of or from, arising out of or in connection with violation of these terms, use of this document, violation of the rights of any third party, acts, omissions or negligence of third parties, their directors, employees or agents. To the extent permitted by law, Beansprout shall not be liable to you, any other person, or organization, for any direct, indirect, special, punitive, exemplary, incidental or consequential damages, whether in contract, tort (including negligence), or otherwise, arising in any way from, or in connection with, the use of this document and/or its content. This includes, without limitation, liability for any act or omission in reliance on the information in this document. Beansprout expressly disclaims and excludes all warranties, conditions, representations and terms not expressly set out in this User Agreement, whether express, implied or statutory, with regard to this document and its content, including any implied warranties or representations about the accuracy or completeness of this document and the content, suitability and general availability, or whether it is free from error. 

If these terms or any part of them is understood to be illegal, invalid or otherwise unenforceable under the laws of any state or country in which these terms are intended to be effective, then to the extent that they are illegal, invalid or unenforceable, they shall in that state or country be treated as severed and deleted from these terms and the remaining terms shall survive and remain fully intact and in effect and will continue to be binding and enforceable in that state or country. 

These terms, as well as any claims arising from or related thereto, are governed by the laws of Singapore without reference to the principles of conflicts of laws thereof. You agree to submit to the personal and exclusive jurisdiction of the courts of Singapore with respect to all disputes arising out of or related to this Agreement. Beansprout and you each hereby irrevocably consent to the jurisdiction of such courts, and each Party hereby waives any claim or defence that such forum is not convenient or proper.