Mapletree Logistics Trust - OCBC Investment 2017-05-02: Decent End to FY17, Stabilising Operations

MAPLETREE LOGISTICS TRUST M44U.SI

Mapletree Logistics Trust - Decent End to FY17, Stabilising Operations

Mapletree Logistics Trust’s (MLT) 4QFY17 results came in within our expectations.
Gross revenue and NPI grew 9.1% and 10.5% YoY to S$96.5m and S$80.3m, respectively. This was underpinned largely by income from four acquisitions in Australia, Malaysia and Vietnam, contribution from properties which have completed their redevelopment, and higher revenue from existing properties in Hong Kong.
Consequently, DPU rose 3.3% YoY to 1.86 S cents, as growth from the aforementioned factors was partially offset by an increase in borrowing costs and higher distribution to perpetual securities holders.
For FY17, MLT’s gross revenue jumped 6.6% to S$373.1m and accounted for 99.9% of our forecast. DPU of 7.44 S cents was an improvement of 0.8% and was 0.6% above our projection.

Operationally, MLT’s performance has shown signs of stabilising, with portfolio occupancy of 96.3% (+0.2 ppt QoQ).
Australia, which has been one of MLT’s key focus markets, recorded full occupancy, as at 31 Mar 2017. The weighted average rental reversion for leases renewed in 4QFY17 came in at 0.4%, largely buoyed by Hong Kong (+5%), as Singapore and South Korea were flat.
Overall FY17 rental reversion also came in flat due largely to the -6% drag in 1QFY17.
Looking ahead, only 2.9% of MLT’s NLA expiring in FY18 pertains to single-user assets (SUA). This reduction in concentration risk can be attributed to management’s proactive leasing approach.
MLT will also be placing an increasing focus on targeting more end-users for its space. These tenants tend to take a longer-term view in their leasing and are also more willing to commit to larger spaces, as compared to 3PLs which have largely become more cost conscious.

In terms of financial position, MLT’s aggregate leverage stood at 38.5%, as at end-FY17, with ~81% of its debt hedged.
We fine-tune our assumptions, roll forward our valuations and also ascribe a lower cost of equity of 8.2% (previously 8.5%) in our model, given MLT’s more stable outlook.
Our DDM-derived fair value is bumped up from S$1.06 to S$1.14. Maintain HOLD.

Wong Teck Ching Andy CFA OCBC Investment | http://www.ocbcresearch.com/ 2017-05-02

OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 1.14 Up 1.060