Mapletree Logistics Trust - DBS Research 2016-01-07: Acquisitions to drive growth

MAPLETREE LOGISTICS TRUST M44U.SI

Mapletree Logistics Trust - Acquisitions to drive growth

We maintain our BUY rating with TP of S$1.15, based on DCF valuation.
Recent acquisitions have placed the Trust back on a growth path, with more to follow.
Yields are attractive at >7.0%, offering total returns of 23%.

2Q16 revenues and net property income rose 7% and 6% respectively, on the back of an expanded portfolio and higher revenues achieved for Singapore and HK assets.
Portfolio occupancy rose marginally to 96.9% with a longer WALE of 4.8 years offering income visibility.
DPU of 1.86 Scts however dipped 1% y-o-y mainly due to gains distributed in 2Q15; stripping those gains out, and earnings would have been flattish.
Looking ahead, the manager continues to expect headwinds for its operations in S’pore/Korea from competition.

We are positive on MLT’s rising acquisition growth momentum and strategy to optimise yields through strategic redevelopments to diversify its earnings base.
Growth will come from a visible sponsor pipeline, which is currently under various stages of developments.
In addition, the completion of various AEIs will underpin medium term growth for the Trust. These growth drivers are expected to more than compensate for the risk of falling rents and vacancy rates especially in S’pore given ongoing property conversions.

We maintain our BUY rating with TP of S$1.15, based on DCF valuation.
At its current price, MLT offers investors dividend yields of 7.5-8.0% for FY16-18F.

Acquisitions ramp up faster than expected. A faster-than-projected acquisition pace or a better-than-expected outlook for the Singapore warehouse market will translate to positive surprises to earnings estimates, and re-rate the stock higher.

Derek Tan DBS Vickers | Mervin Song CFA DBS Vickers | http://www.dbsvickers.com/ 2016-01-07

DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 1.15 Same 1.15