Mapletree Logistics Trust - RHB Invest 2016-01-27: More Pressure Awaiting

Mapletree Logistics Trust - RHB Invest 2016-01-27: More Pressure Awaiting MAPLETREE LOGISTICS TRUST M44U.SI 

Mapletree Logistics Trust (MLT SP) - More Pressure Awaiting 

  • Mapletree’s 3QFY16 results came in below our expectations, mainly due to the impact of its conversion of SUAs to MTBs. 
  • We trim our estimated DPU but maintain our NEUTRAL recommendation, while our TP of SGD0.89 (from SGD0.93, 4% downside) implies an FY15 (Mar) P/BV of 0.87x. 
  • Management said the take-up rate for its assets in Singapore has slowed down, and tenants are resistant to rental escalation in the current business environment. 

 Results slightly under our estimate as conversions to MTBs continue to hurt. 

  • Mapletree Logistics Trust’s (Mapletree) results were slightly below our forecast as its 3QFY16/9MFY16 distribution per unit (DPU) came in c.2%/1% YoY lower, the latter at around 70% of our fullyear estimate. 
  • This was underpinned by a c.7% YoY growth in revenue, offset by higher property expenses mainly due to the conversion of single-user assets (SUAs) to multi-tenanted buildings (MTBs). 
  • Its gearing ratio remained stable at 39.0%, while most of its income stream for this year has been hedged into SGD. 

 Operational performance of its portfolio is rather stable. 

  • Its portfolio occupancy remained stable at c.97%, while we note a slight 10bps dip in its Singapore portfolio. 
  • The REIT achieved an average positive rental reversion of 5%, mainly supported by assets in Singapore and Hong Kong, which gained rental reversions of +6.8% and +18.0% respectively. Only in Japan did its assets book negative rental reversion. 

 Headwinds to persist in the next 12 months. 

  • As 8.6% of total leases (by net lettable area) face expiry in the next financial year, we think that its rental reversion is more likely to moderate downwards to low singledigits – as tenants may not agree with the rental rate hike, in light of the uncertain business environment and the supply glut of logistics assets. 

 Still NEUTRAL, with a lower TP of SGD0.89. 

  • We trim our FY16/FY17 DPU estimates by 4.8/4.7%, resulting in a lower TP of SGD0.89. 
  • We reiterate that there may be further headwinds for Mapletree, as more than half of its leases set to expire in FY17 are for SUAs, which may pressure net property income (NPI) margins further. 
  • The key risk to our forecasts would lie in its ability to seek out quality tenants upon conversion to MTBs.

Ivan Looi RHB Invest | http://www.rhbinvest.com.sg/ 2016-01-27
RHB Invest SGX Stock Analyst Report NEUTRAL Maintain NEUTRAL 0.89 Down 0.93