Mapletree Logistics Trust - DBS Research 2017-01-25: Acquisitions remain a main driver for growth

Mapletree Logistics Trust - DBS Vickers 2017-01-25: Acquisitions remain a main driver for growth MAPLETREE LOGISTICS TRUST M44U.SI

Mapletree Logistics Trust - Acquisitions remain a main driver for growth

  • DPU of 1.67 Scts in line.
  • Organic growth remains modest; acquisitions to drive earnings in FY18F.
  • Gearing remains optimal at 38%. 
  • Asset monetisation could take centre stage.


Maintain BUY, TP S$1.15. 

  • Mapletree Logistics Trust (MLT) remains attractive for its steady DPU growth profile of c.2-3% driven by an actively managed portfolio and regular asset acquisitions. We see MLT remaining on a growth path. 
  • BUY maintained, yield of 7.0-7.1% 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, it has deployed close to S$313m into acquisitions at yields ranging 7.1%-9.9%. 
  • With gearing already at 38%, we see the REIT looking to monetise assets and re-deploying proceeds into acquisitions as a key focus area in FY17-18F. That said, MLT continues to enjoy a myriad of acquisition opportunities from its Sponsor, and third parties in Australia, Korea, and China.


3Q17 results in line. 

  • Top line and net property income were up 7.1% and 7.7% y-o-y respectively. Higher revenues were mainly driven by acquisitions. 
  • Distributable income was 5.8% higher while DPU was flat mainly due to higher interest incurred on the issuance of close to S$250m worth of perpetual securities.


Valuation

  • We maintain our BUY call and TP of S$1.15. 
  • The stock offers a total potential return of 16% (9% share price 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 adjustments to our earnings estimates, and re-rate the stock higher.




Derek Tan DBS Vickers | Mervin Song CFA DBS Vickers | Singapore Research Team DBS Vickers | http://www.dbsvickers.com/ 2017-01-25
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 1.150 Same 1.150



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