Mapletree Logistics Trust - UOB Kay Hian 2017-04-28: 1Q17 Results Of MLT In Line

REITs − Singapore - UOB Kay Hian 2017-04-28: 1Q17: Results Of MLT (In Line) MAPLETREE LOGISTICS TRUST M44U.SI

REITs − Singapore - 1Q17: Results Of MLT (In Line)

  • MLT’s results are in line with expectations. Portfolio rental reversions were at +0.4% in the quarter. Management remains cautiously optimistic on its outlook due to its well-diversified portfolio. 
  • Maintain BUY on MLT with an unchanged target price of S$1.20. 
  • Maintain OVERWEIGHT on the sector.



WHAT’S NEW

  • Mapletree Logistics Trust (MLT) reported quarterly results.


ACTION 


Mapletree Logistics Trust (MLT SP/BUY/S$1.14/Target:S$1.20)

  • Results in line; maintain BUY with unchanged target price of S$1.20, based on DDM (required rate of return: 6.7%, terminal growth: 1.1%). 
  • MLT reported 4QFY17 DPU of 1.86 S cents, up 3.3% yoy. The quarter saw gross revenue and NPI increase by 9.1% yoy and 10.5% yoy respectively, on the back of full-quarter contribution from an Australia asset, its Toh Guan asset in Singapore and a stronger HKD against the SGD.
  • 4QFY17 distributable income increased by a slower 4.1% yoy due to higher distributions to perp holders. The results were in line with expectations, forming 101.4% of our full-year DPU estimates. 
  • Overall portfolio rental reversions hit +0.4% in 4QFY17. Portfolio value of S$5.5b up 9.3% yoy, bolstered by acquisitions in Australia, Malaysia and Vietnam. We note that the Singapore portfolio saw slight revaluation loss of 0.8%, even after accounting for the divestment of 20 Old Toh Tuck Road.

AEI updates. 

  • The REIT manager intends to begin a phased S$70m redevelopment of Ouluo Logistics Centre in Shanghai (Phase 1: May 17, Phase 2: Oct 18). The redevelopment will increase the project’s GFA by 143.5% to 80,708 sqm, with Phase 1 and 2 to complete by 2QFY19 and 4QFY20 respectively. In Singapore the ongoing S$100m redevelopment of 76 Pioneer Road is slated for completion by end-17.
  • Pro-active leasing efforts resulting in well-spread out lease expiry profile, with 17.5% and 21.4% of total leases by NLA expiring in FY18 and FY19 respectively. Of these expiring leases, China accounts for 5.5% and 4.1% in FY18 and FY19 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.
  • Assuming refinancing rate of 4.18% (MLT’s S$250m perp issuance rate in May 16), reissuance 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 4.9% in FY18 and FY19 respectively). However, management also has acknowledged that a challenging leasing environment continues to place downward pressure on occupancy and rents.
  • Management noted transitory downtime in Singapore and South Korea, especially as it works to backfill the space left behind by South Korean tenant KPPC in end-16 (former top tenant accounting for 1.9% of gross revenue).

Overseas acquisitions. 

  • Management highlighted target markets Vietnam and Australia (expanding Australian footprint beyond Sydney). MLT currently derives about 69% of overall asset value from its overseas assets.





Derek Chang UOB Kay Hian | Vikrant Pandey UOB Kay Hian | http://research.uobkayhian.com/ 2017-04-28
UOB Kay Hian SGX Stock Analyst Report BUY Maintain BUY 1.200 Same 1.200



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