Mapletree Logistics Trust - OCBC Investment 2016-10-25: Some Encouraging Signs But Challenges Remain

Mapletree Logistics Trust - OCBC Investment 2016-10-25: Some Encouraging Signs But Challenges Remain MAPLETREE LOGISTICS TRUST M44U.SI

Mapletree Logistics Trust - Some Encouraging Signs But Challenges Remain

  • 2QFY17 DPU flat YoY.
  • Average rental reversion of 2%.
  • HOLD with slightly higher FV.

2QFY17 results met our expectations 

  • Mapletree Logistics Trust’s (MLT) 2QFY17 results came in within our expectations. 
  • Gross revenue grew 4.7% YoY to S$91.6m, underpinned by contributions from acquisitions and completed redevelopment projects, but partially offset by lower revenue from Singapore, China and South Korea. DPU came in flat YoY at 1.86 S cents. 
  • On a 1HFY17 basis, gross revenue rose 5.0% to S$181.1m and formed 49.3% of our FY17 forecast. DPU of 3.71 S cents was similar to 1HFY16, and accounted for 50.8% of our full-year projection.

Improved occupancy and positive rental reversions 

  • Operationally, MLT managed to improve its occupancy from 95.4% (as at 30 Jun 2016) to 96.4% as a result of higher take-up in Singapore, Hong Kong, China and Malaysia. Only South Korea registered a weaker occupancy. 
  • Positive rental reversions of 2% were achieved, and this was largely contributed by Singapore, Hong Kong and South Korea. However, looking ahead, management expects the leasing environment to remain challenging, especially for several of its single user assets. This is driven by muted global economic conditions which have impacted business and consumer sentiment. 
  • MLT has 10.1% of its NLA which is expiring for the remainder of FY17, of which 4.1% is for single user assets and 6.0% is for multi-tenanted buildings.

Maintain HOLD 

  • We incorporate MLT’s recently acquired Mapletree Logistics Park Phase 2 property in Vietnam in our model. This asset was acquired at an attractive NPI yield of 9.9% and was funded by the partial proceeds from its S$250m perpetual securities which were issued in May this year. 
  • We also update the timeline of MLT’s recent acquisitions in Australia and Malaysia (completion was earlier than we expected). 
  • Consequently, our DPU forecasts for FY17 and FY18 are raised by 1.1% and 0.9%, respectively, and our fair value estimate inches up slightly from S$1.04 to S$1.05. 
  • Maintain HOLD on MLT as we believe valuations appear fair, with the stock trading at FY17F distribution yield of 7.0%, which is close to its 5-year average of 6.9%

Wong Teck Ching Andy CFA OCBC Investment | http://www.ocbcresearch.com/ 2016-10-25
OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 1.05 Up 1.04