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

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.

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

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.

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.

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.

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