Japan Logistics Fund (TSE:8967) Expands In Hyogo, Is It Trading Above Fair Value?
Japan Logistics Fund expands logistics footprint with Hyogo acquisition
Japan Logistics Fund (TSE:8967) has completed the purchase of the Hyogo Tojo Logistics Center for ¥4,500 million, using borrowings and cash on hand, at a reported appraisal NOI yield of 4.5%.
The asset was acquired at a 6.4% discount to its ¥4,810 million appraisal value, with the trust set to run through October 31, 2036. This may be relevant for investors focusing on long lease horizons.
Japan Logistics Fund’s latest Hyogo deal lands at a time when the share price has slipped 5.5% over the past month and 8.2% over 90 days, while the 1-year total shareholder return is down 5.6% but still up 4.3% over three years, suggesting that near term sentiment has cooled even as longer term holders have seen modest gains.
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Japan Logistics Fund now trades at a steep discount to analyst targets, while the Hyogo purchase came in below appraisal. Is the market fairly cautious about this REIT, or leaning too far to one side?
Preferred P/E of 18.5x for Japan Logistics Fund: Is it justified?
On simple earnings terms, Japan Logistics Fund trades on a P/E of 18.5x, which sits below some peers yet above the broader Asian industrial REIT group. The latest close at ¥88,600 puts that multiple at the center of the valuation debate rather than at an extreme.
The P/E ratio compares the current share price with yearly earnings per share. For a logistics focused REIT like Japan Logistics Fund, it shows how much investors are paying for each yen of profit, given a portfolio of warehouses and distribution hubs that tends to move in step with rental income and financing costs.
Earnings quality looks supportive for that earnings based valuation. Profit margins are currently 54.7%, higher than the 51.4% level reported a year earlier, and earnings grew 14.5% over the past year compared with 9.3% per year over five years, with that pace ahead of the industrial REITs sector figure of 6.3%. High quality earnings are flagged, which suggests fewer one off items distorting those profits.
Against direct peers, the picture is mixed. The P/E of 18.5x is below the peer average of 24.3x, which implies the market is attaching a lower earnings multiple than many similar REITs even though the fair P/E estimate sits very close at 18.8x. At the same time, the stock is described as expensive versus the wider Asian industrial REITs industry, which trades on 15.6x. Investors are still paying a premium compared to the broader regional group, but not an aggressive one based on the fair ratio level the market could move towards.
Explore the SWS fair ratio for Japan Logistics Fund.
Result: Price-to-Earnings of 18.5x (ABOUT RIGHT)
Still, the recent decline in revenue and net income growth, together with the 1 year total return in negative territory, could challenge the current valuation story for Japan Logistics Fund.
Find out about the key risks to this Japan Logistics Fund narrative.
Another view on Japan Logistics Fund’s value
The P/E workup painted Japan Logistics Fund as roughly in line with its fair ratio. A different lens tells a cooler story. Our DCF model estimates future cash flows at ¥83,368.72 per unit, which sits below the current ¥88,600 quote. That points to a stock pricing in more optimism than the cash flow math supports. Does that gap reflect genuine resilience in the logistics portfolio or just stretched expectations?
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Japan Logistics Fund for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 12 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
Sentiment around Japan Logistics Fund looks split, with clear concerns and some optimism sitting side by side. Consider moving quickly and testing the data against your own expectations using the 3 key rewards and 3 important warning signs
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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