Mapletree Logistics Trust - RHB Invest 2016-10-26: 2QFY16/17 Results ~ Cloudy Skies Ahead. Neutral.

Mapletree Logistics Trust - RHB Invest 2016-10-26: 2QFY16/17 Results ~ Cloudy Skies Ahead. Neutral MAPLETREE LOGISTICS TRUST M44U.SI

Mapletree Logistics Trust - 2QFY16/17 Results ~ Cloudy Skies Ahead. Neutral


Highlights

  • Mapletree Logistics Trust (MLT) 2Q/1HFY17 DPU came in flat at 1.86 SGD cents and 3.71 SGD cents respectively meeting 48% of our full year forecasts.
  • The flat DPU growth despite a 5% YoY increase in revenue was mainly due to the issuance of SGD250m perps in May 2016, which resulted in a 55% increase in amount distributable to perps holders. DPU was also impacted due to the timing difference between asset acquisition and perps issuance. Excluding the timing impact, DPU would have increased 2% YoY in 2QFY17.
  • Overall occupancy improved 1ppt QoQ to 96.4% with improvement across all geographies. Rental reversion remained positive at 2% mainly contributed by Singapore, Hong Kong and South Korea.
  • Portfolio WALE declined slightly to 4.1 years (4.4 years in 1QFY17) due to newly acquired properties having shorter leases.


Key takeaways

  • Looking ahead, we expect MLT to see some rental pressure on upcoming lease renewals especially in Singapore, China and South Korea. MLT has about 10%/17% of is NLA due for renewals in 2HFY17/FY18.
  • Singapore logistics property is expected to see rental pressures due to huge supply and weaker demand. In China, management is seeing a two-tier market with tier-1 cities still performing strongly, while weakness is seen in tier-2 cities like Wuxi and Chongqing.
  • In South Korea, the tenant who is currently occupying 100% of Mapletree Logistics Hub - Pyeongtaek is expected to vacate the space by 4QFY17. Management is currently in talks with a tenant who is looking to takeup about 80% of the total NLA at current market rents.
  • Management is also on the active look out for acquisitions and has about SGD90m unutilised amount from the recently issued perpetual securities, which it plans to deploy soon. In 1HFY17, MLT made acquisitions worth SGD160m across Sydney, Australia (4 properties), Shah Alam, Malaysia and Binh Duong, Vietnam.
  • MLT sees Australia as favourable market for acquisitions as it offers scalability and competition has subsided in recent months. MLT is also looking at options to recycle capital by divesting some of its assets.
  • Going forward MLT will be scrapping its Dividend Reinvestment Plan (DRP) due to the low take-up and associated high costs.
  • We maintain our NEUTRAL recommendation with a TP of SGD0.89, as we see headwinds persisting across its portfolio in the near- term. We also expect pressure on NPI margins with the conversion of single-user assets (SUAs) to multi-tenanted buildings (MTBs).




Vijay Natarajan RHB Invest | http://www.rhbinvest.com.sg/ 2016-10-26
RHB Invest SGX Stock Analyst Report NEUTRAL Maintain NEUTRAL 0.89 Same 0.890



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