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.
- 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.