MAPLETREE LOGISTICS TRUST
M44U.SI
Mapletree Logistics Trust (MLT SP) - Emerging Presence In Vietnam
- We have retooled our model to factor in MLT’s latest acquisition in Vietnam, in line with management's diversification strategy.
- While we have factored in DPU accretion from the transaction, we raise our required return rate marginally to reflect a slightly heightened risk profile, leaving our target price of S$1.28 unchanged.
- Maintain BUY.
WHAT'S NEW
- We have adjusted our earnings model to factor in Mapletree Logistics Trust’s (MLT) recent acquisition of a Vietnam warehouse for VND$339.2b (about S$20.6m) from sponsor Mapletree Investments.
STOCK IMPACT
Acquisition in line with management's strategy of building a diversified portfolio
- Acquisition in line with management's strategy of building a diversified portfolio of properties by venturing beyond the domestic shore. We are not surprised by this acquisition, given that management had flagged Vietnam as a target market (along with Sydney) and that this is a pipeline asset from its sponsor Mapletree Investments.
- Singapore now accounts for 38.8% of the portfolio, followed by Japan (18.5%) and Hong Kong (14.4%).
Sufficient debt headroom to fuel inorganic growth.
- With aggregate leverage at 37.4% post acquisition, we estimate debt headroom at S$230m to support further acquisition-led growth, assuming a comfortable gearing level of 40%.
- We opine that near-term acquisitions, especially in target market Sydney, will likely be driven by third-party transactions as most of the pipeline assets could likely take 1-2 years to stabilise before they could be injected.
Expected yield accretion.
- With an NPI yield of 9.9%, management expects the acquisition to be yield accretive. The acquisition will be fully funded by proceeds from the recent issuance of perpetual securities (S$250m).
- The REIT manager has guided for gearing to remain at 37.4% post completion of acquisition. The total portfolio is expected to reach 124 properties and book value of S$5.3b.
Transacted price below asset valuations by independent valuers.
- The purchase price of VND339.2b is 3% below the average appraised value of VND350.5b by independent valuers CBRE and JLL.
Asset details.
- The asset (MLT's third in Vietnam) has a remaining land lease of 39 years, and is well connected to Ho Chi Minh City, Tan Son Nhat International Airport and various seaports. The asset is 100% occupied, with WALE of 1.8 years, a tenant base of mainly international third-party logistics providers such as Kubota Corporation and DKSH.
- Vietnam now accounts for about 1.9% of total portfolio value.
No uplift to target price.
- Despite factoring in DPU accretion of 0.3-0.7% from the transaction, risk is marginally heightened due to the unhedged exposure (S$/US$ funding) to an emerging market like Vietnam. As such, we raise our required rate of return by 5bp to 6.7% (6.6% previously), resulting in an unchanged target price of S$1.28.
EARNINGS REVISION/RISK
- We tweak upwards our DPU estimates by 0.3%, 0.6% and 0.7% for FY17-19 respectively after factoring in the latest acquisition.
- We raise our required rate of return by 5bp to reflect the slightly higher risk profile of the transaction.
VALUATION/RECOMMENDATION
- Maintain BUY and target price of S$1.28, based on a two-stage DDM model (required rate of return: 6.7%; terminal growth rate: 1.5%)
SHARE PRICE CATALYST
- Yield-accretive acquisitions.
Vikrant Pandey
UOB Kay Hian
|
Derek Chang
UOB Kay Hian
|
http://research.uobkayhian.com/
2016-09-29
UOB Kay Hian
SGX Stock
Analyst Report
1.28
Same
1.280
