Mapletree Logistics Trust - RHB Invest 2015-10-21: Ongoing Restructuring

Mapletree Logistics Trust - RHB Invest 2015-10-21: Ongoing Restructuring MAPLETREE LOGISTICS TRUST M44U.SI 

Mapletree Logistics Trust - Ongoing Restructuring 

  • 1H/2QFY16 results met our expectations as DPU declined 1.9%/1.1% YoY. 
  • Maintain NEUTRAL and SGD0.93 TP (-2.9% total return). 
  • We note that average rental reversion for the portfolio has softened to 3%, as management cited increasing difficulty in commanding higher rental rates from tenants. However, portfolio occupancy rates inched up slightly to 96.9% as several properties were converted to multi-tenanted buildings. 

 Results in line with our expectations. 

  • Mapletree Logistics Trust’s 1H/2QFY16 (Mar) DPU declined 1.9%/1.1% YoY, meeting ~47% of our full-year estimates. We note that the overall portfolio occupancy level inched up slightly to 96.9% (1QFY16: 96.6%), mainly due to higher occupancies at several properties that were converted to multi-tenanted buildings (MTBs). 
  • In addition, net property income (NPI) margin has been compressed due to higher property expenses incurred during the conversion of single-user assets (SUAs) into MTBs. During this ongoing transition, we expect NPI margins to be under pressure as property expenses continue to escalate. 

 Lower positive rental reversion booked for the quarter. 

  • Amid the uncertain macroeconomic environment, the REIT faced increasing difficulties in commanding higher rental reversion. Mapletree Logistics Trust booked in a lower average rental reversion of 3% (1QFY16: 5%) for the quarter, as its tenants experienced thinner margins. 
  • Looking forward, we expect such challenges to persist as management has also expressed concerns over older assets, but remained confident in assets with good specifications. 

 Maintain NEUTRAL with a TP of SGD0.93. 

  • The REIT is currently undergoing a portfolio restructuring and we are expecting headwinds for the next two quarters. 
  • We also note that the leasing market in Singapore continues to face headwinds, as management noted that tenants are not willing to commit space earlier. 
  • We take a cautious position as Mapletree Logistics Trust’s gearing increased to 38.8% mainly due to additional loans drawn from its acquisition in Australia. 
  • We reiterate our NEUTRAL recommendation with a DDM-derived TP of SGD0.93.

Ivan Looi RHB Research | Ong Kian Lin RHB Research | http://www.rhbinvest.com.sg/ 2015-10-21
RHB Research SGX Stock Analyst Report NEUTRAL Maintain NEUTRAL 0.93 Same 0.93