Mapletree Logistics Trust - UOB Kay Hian 2017-01-24: Industrial REITs ~ Results For MLT (In Line)

Industrial REITs - UOB Kay Hian 2017-01-24: Results For MLT (In Line) And Cache (Below) MAPLETREE LOGISTICS TRUST M44U.SI

Industrial REITs - Results For MLT (In Line) And Cache (Below)

  • Results were in line for Mapletree Logistics Trust (MLT); maintain BUY with an unchanged target price of S$1.20
  • Positive overall rental reversions were registered. Despite sector headwinds, management remains stoically upbeat on portfolio resilience. 



WHAT’S NEW

  • Mapletree Logistics Trust (MLT) and Cache Logistics Trust (Cache) reported their quarterly results.


ACTION 


Results in line; maintain BUY with target price of S$1.20, based on DDM (required rate of return: 6.7%, terminal growth: 1.1%). 

  • MLT reported 3QFY17 DPU of 1.87 S cents, 0% yoy. 
  • The quarter saw gross revenue and NPI increase by 7.4% yoy and 5.7% yoy respectively, on the back of increased contributions from its Australia, Vietnam and Korea acquisitions and its Toh Guan asset in Singapore. 
  • 3QFY17 distributable income increased by a slower 0.8% yoy due to higher distributions to perp holders and borrowing costs. The results were in line with expectations, coming in at 76% of our full-year estimates.
  • 3QFY17 overall portfolio rental reversions at +2%, ranging from reversions of 1% in Singapore and Vietnam to +4% in Hong Kong and China. Management has previously alluded to possible negative rental reversions in China, especially in secondary cities like Wuxi.
  • Pro-active leasing efforts resulting in well-spread out lease expiry profile, with 5.0% and 17.9% of total leases by NLA expiring in FY17 and FY18 respectively. Of these expiring leases, China accounts for only 0.6% and 5.3% in FY17 and FY18 respectively.

Potential cost savings from refinancing of perpetual security in 2017. 

  • We note that the callable date for 2012’s issuance of perps (S$350m at 5.375%) is due in Sep 17.
  • Against its recent S$250m issuance at 4.18%, refinancing could imply cost savings of S$3.5m for every 1ppt decline for MLT.

Cautious optimism. 

  • Management seemed stoically upbeat on forward performance, pointing to its diversified portfolio and well-spread lease expiry profile. This is also notwithstanding more manageable SUA expiries (2.9% and 3.3% in FY17 and FY18 respectively). However, management also has acknowledged that a challenging leasing environment continues to place downward pressure on occupancy and rents. 
  • Leasing renewals at lower tenures (2-3 years) were previously noted by management, likely due to a more tepid outlook.

Overseas acquisitions. 

  • Management highlighted target markets Vietnam and Australia to potentially deploy an unutilised S$89m from May’s perp issuance. 
  • Management has also expressed its willingness to expand its Australian footprint beyond Sydney. 
  • MLT currently derives about 60.7% of overall asset value from overseas assets.







Derek Chang UOB Kay Hian | Vikrant Pandey UOB Kay Hian | http://research.uobkayhian.com/ 2017-01-24
UOB Kay Hian SGX Stock Analyst Report BUY Maintain BUY 1.200 Same 1.200
BUY Maintain BUY 0.950 Down 0.990





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