Mapletree Logistics Trust - 3QFY17 Hanging on even if the sun refuses to shine
- 9MFY17 DPU of 5.58 Scts (flat yoy) was in line with our and consensus expectations, at 75% of our FY3/17 estimate. 3QFY17 DPU was 25% of our FY17F.
- Portfolio occupancy was 96.1% in 3QFY17, down 30bp qoq, due to lower occupancy in China. Portfolio average rental reversion of +2% was achieved in 3Q.
- 5B Toh Guan was 100% pre-committed as of Jan. The E-Land lease at Pyeongtaek expires in mid-Mar and we expect the SUA to be converted.
- Mapletree Logistics Trust (MLT) plans redevelopment of Ouluo logistics centre for c.S$85m in two phases. We believe the AEI will be partially funded by debt and capital recycling.
- Hold maintained, with unchanged DDM-based target price. The stock trades at 7.3% FY18 dividend yield and 1x FY17 P/BV.
3QFY17 results highlights
- Despite the challenging leasing environment, MLT achieved 3QFY17 DPU of 1.87 Scts, flat yoy.
- Contributions from acquisitions and redevelopment/AEI projects, along with the stronger performance in Hong Kong led to a 7%/8% yoy increase in topline/NPI. This was partially offset by softer earnings in Singapore and the Pyeongtaek property in South Korea.
- Amount distributable to unitholders rose 0.8% yoy to S$48.6m in 3QFY17.
- Portfolio occupancy was 96.1% in 3QFY17, down 30bp qoq. Occupancy rates were stable or higher qoq in all markets except China. Occupancy in China dropped 5% pts qoq to 91.5% due to the non-renewal of a large tenant in one of MLT’s Shanghai assets.
- MLT’s portfolio achieved average rental reversion of 2%, ranging from 1% (Singapore and Vietnam) to 4% (Hong Kong and China). We expect rental reversion to remain moderate going forward.
Lease expiry profile
- Around 5% of NLA is coming up for renewal in FY17 and 17.9% in FY18. 3.3% of NLA that is expiring in FY18 is attributable to 12 single-user assets (SUAs). Of the 12, four are likely to be renewed, while two in Singapore are unlikely to be renewed. The remaining six assets are in Singapore, Malaysia, Korea and Japan.
- The E-Land lease at Pyeongtaek expires in mid-Mar and we expect the SUA to be converted.
- Additionally, 5B Toh Guan was 100% pre-committed as of Jan (now c.85% physically occupied).
- The manager drew net additional loans of c.S$174m in the quarter, largely to fund the acquisition in Australia. Aggregate debt was partially offset by lower translated borrowings mainly due to weaker Japanese ¥. Consequently, aggregate gearing rose to 38.7% at end-9MFY17 (end-1HFY17: 37.6%).
- Looking ahead, 3% and 13% of MLT’s debt is up for refinancing in FY17F and FY18F, reflecting a well-spread debt maturity profile.
- We note that the S$350m 5.375% perpetual securities is callable in Sep 17.
Active asset management; Hold maintained
- The manager is planning to redevelop Ouluo logistics centre for S$85m in two phases.
- We believe the AEI will be partially funded by debt and capital recycling. Hold maintained, with unchanged DDM-based target price (S$1.02).
- The stock is trading FY18 dividend yield of 7.3% and FY17 P/BV of 1x.
- Upside/downside risks hinge on acquisitions and leasing activities.