Mapletree Logistics Trust - OCBC Investment 2016-01-26: Looking better from a valuation standpoint

Mapletree Logistics Trust - OCBC Investment 2016-01-26: Looking better from a valuation standpoint MAPLETREE LOGISTICS TRUST M44U.SI 

Mapletree Logistics Trust: Looking better from a valuation standpoint 

 3QFY16 DPU flat YoY 
 Occupancy stable at 96.9% 
 FY17F yield of 8.5% 

3QFY16 results within expectations 

  • Mapletree Logistics Trust (MLT) reported 3QFY16 gross revenue of S$88.9m, which translates into YoY growth of 7.3%. This was underpinned by contribution from acquisitions, coupled with higher revenue from existing assets in China and Hong Kong, but partially offset by lower revenue from several converted multi-tenanted buildings in Singapore. 
  • Consequently, NPI grew 6.7% YoY to S$74.1m, but DPU was flat at 1.87 S cents, largely due to higher management fees and borrowing costs, as well as a larger unit base. 
  • Results were within our expectations. 
  • For 9MFY16, MLT’s gross revenue rose 6.5% to S$261.5m, forming 73.3% of our FY16 forecast; DPU of 5.58 S cents represented a slight decline of 1.2%, and constituted 73.2% of our full-year projection. 

Positive rental reversions; occupancy stable 

  • Although MLT continued to face headwinds from a subdued macroeconomic environment, it managed to deliver positive rental reversions averaging 5% in 3QFY16, driven mainly by Hong Kong, Singapore and China. 
  • Overall portfolio occupancy was kept unchanged at 96.9% on a QoQ basis. 
  • YTD, MLT has already renewed/replaced 93% of its leases due for expiry in FY16. 

Upgrade to BUY on valuation grounds 

  • We trim our FY16 and FY17 DPU forecasts slightly by 2.2% and 2.1%, respectively, on lower gross revenue assumptions. However, our DDM-derived fair value estimate remains intact at S$1.04. 
  • MLT’s share price has fallen 8.1% since the start of the year, in-line with the broad market weakness. 
  • Despite our reduced forecasts, MLT still offers a projected distribution yield of 8.2% for FY16 and 8.5% for FY17. We believe valuations are now attractive, as its blended FY16/17F yield of 8.3% is more than two standard deviations above its 5-year mean of 6.9%. 
  • MLT’s FY16F P/B ratio of 0.89x is also close to two standard deviations below its 5-year average of 1.07x. Hence, we upgrade MLT from ‘Hold’ to BUY, on valuation grounds.

Wong Teck Ching Andy CFA OCBC Securities | http://www.ocbcresearch.com/ 2016-01-26
OCBC Securities SGX Stock Analyst Report BUY Upgrade HOLD 1.04 Same 1.04