Mapletree Logistics Trust - CIMB Research 2015-12-09: Inorganic growth continues

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MAPLETREE LOGISTICS TRUST M44U.SI 

Mapletree Logistics Trust - Inorganic growth continues 

• We expect lease renewals to remain positive, albeit at a slower pace. 
• We expect the higher income from the redevelopment of its older properties to more than offset the higher expenses from asset conversion. 
• Inorganic growth to continue, keep our Add rating with an unchanged target price. 

■ Expect lease renewals to remain positive, albeit at a slower pace 

• MLT renewed 572,000 sq m of space at an average rental reversion of 3% in 2QFY16 (vs. 5% in 1QFY16), while portfolio occupancy crept up to 96.9% as more of the MTB space was taken up. An estimated 5.4% of leases are due to be renewed in FY16 and a further 16.3% in FY17. We expect rental reversion quantums to remain positive, albeit at a slower pace, given the more competitive leasing environment in Singapore and China. 

■ More asset conversion in the works 

• MLT has two assets to be converted to MTB (multi-tenanted building), another two properties earmarked for redevelopment/divestment in Singapore in FY16 and nine single-user leases that are expiring in FY17. However, we expect the higher income from the redevelopment of its older properties to more than offset the higher expenses from asset conversions. 
• The first redeveloped property – the enlarged 63,500 sq m Toh Guan Estate – is slated for completion in 1QFY17. 

■ Strong acquisition track record 

• YTD, MLT has completed three yield-accretive acquisitions of c.S$295m to scale up its presence in growth markets. It acquired Dakonet Logistics Centre in South Korea (S$21m), Mapletree Logistics Park Bac Ninh Phase 1 in Vietnam (S$21m) and Coles Chilled Distribution Centre in Sydney (S$253m). 
• With 100% occupancy at all three properties and NPI yields of 8%, 10% and 5.6% respectively, these acquisitions are expected to boost FY17 DPU by c.4%. 

■ Inorganic growth continues, maintain Add 

• In the meantime, MLT continues to expand via inorganic means such as tapping on third-party assets and its sponsor’s extensive pipeline. 
• Its gearing stands at 38.8%, giving it debt headroom of S$460m (based on maximum 45% gearing). 
• We maintain our Add call on the stock, with an unchanged DDM-based target price of S$1.17.

LOCK Mun Yee CIMB Securities | http://research.itradecimb.com/ 2015-12-09

CIMB Securities SGX Stock Analyst Report ADD Maintain ADD 1.17 Same 1.17