Mapletree Logistics Trust - DBS Research 2016-10-26: Firepower to acquire

Mapletree Logistics Trust - DBS Vickers 2016-10-26: Firepower to acquire MAPLETREE LOGISTICS TRUST M44U.SI

Mapletree Logistics Trust - Firepower to acquire

  • 2Q17 results in line; DPU flat despite operational headwinds.
  • More capital to deploy for acquisitions.
  • BUY maintained, TP S$1.15.




Maintain BUY, TP S$1.15. 

  • Mapletree Logistics Trust (MLT) is emerging stronger post balance sheet recapitalisation and we see acquisitions as a catalyst to drive earnings and share price upside. 
  • With firepower to execute on strategic purchases, MLT remains on a growth path. 
  • BUY maintained, yield of 7.0-7.2% is attractive for a strong quality name.


Acquisitions and developments to drive growth 

  • The issuance of S$250m perpetual securities in May 2016 @ 4.18% has enabled MLT to lock in attractive long-term funding for the REIT. Since then, MLT has deployed close to S$161m and we see more acquisitions in the pipeline. 
  • We believe that opportunities will come from its Sponsor, and third parties in Australia, Korea, and China. 
  • Acquisitions should more than compensate for weaknesses in the various markets that MLT operates in.


2Q16 results in line. 

  • Top line and net property income are up 4.7% and 5.3% y-o-y to S$91.5m and S$76.8m respectively. 
  • Higher revenues were mainly driven from acquisitions (portfolio expanded by six properties to 124 as of 2QFY17). 
  • Distributable income is up by 1.0% while DPU is flat mainly due to higher interest incurred on the issuance of close to S$250m worth of perpetual securities.


Valuation

  • We upgrade our call to BUY, and raise our TP to S$1.15 after imputing acquisitions in our forecasts. 
  • The stock offers a total potential return of 16% (9% upside, 7% yield).


Key Risks to Our View

  • Acquisitions ramping up faster than expected. A faster-than- projected acquisition pace or a better-than-expected outlook for the Singapore warehouse market will translate to positive surprises to earnings estimates, and re-rate the stock higher.




Derek Tan DBS Vickers | Mervin Song CFA DBS Vickers | http://www.dbsvickers.com/ 2016-10-26
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 1.15 Same 1.150



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