Mapletree Logistics Trust - CIMB Research 2017-07-26: Steady Strides

Mapletree Logistics Trust - CIMB Research 2017-07-26: Steady Strides MAPLETREE LOGISTICS TRUST M44U.SI

Mapletree Logistics Trust - Steady Strides

  • Mapletree Logistics Trust (MLT)'s 1QFY3/18 DPU of 1.887 Scts (+2% yoy) was in line with consensus and our estimate, at 25% of our full-year forecast.
  • The trust achieved +6% rental reversion, with portfolio occupancy inching down 0.8% qoq to 95.5%. WALE stood at 3.9 years.
  • MLT may seek to buy sponsor's asset in Tsing Yi (Hong Kong) in the near-term.

1QFY18 results were steady

  • 1QFY18 DPU rose 2% yoy due to stronger contributions from existing properties in Singapore and Hong Kong, and acquisitions in FY17, partially offset by lower contribution from South Korea property (Pyeongtaek property) which was recently converted from a single-user asset (SUA) to a multi-tenanted building (MTB).
  • Occupancy for Pyeongtaek is c.53% today, up from c.30% in 4QFY3/17. The manager hopes to achieve an occupancy of 80% by end-CY18.

Portfolio update

  • 146.6k sq m was renewed/replaced in 1QFY18 (retention rate: 93%), with 13.3% (by NLA) due for renewal in FY18. Of which, 2.7% by NLA stems from SUAs. In Japan, all four SUA leases due for expiry in FY18 have been renewed/replaced.
  • MLT achieved +6% rental reversion (4QFY17: +0.4%), due to Hong Kong (+7%), China (+15%), Japan (+4%) and Vietnam (+4%). Singapore saw flattish reversion of +0.4%. We note that the renewed/replaced lease in China was due to a property in Shanghai.
  • Portfolio occupancy slipped 0.8% pts qoq to 95.5% due to lower occupancy at Pyeongtaek. Otherwise, most countries saw an improvement in occupancy.

Investment management

  • In 1QFY18, MLT announced the proposed divestment of Zama Centre and Shiroishi Centre in Japan for aggregate c.S$165.4m or a combined exit yield of c.4.2%. The estimated gain of S$2.9m will be distributed to unitholders over six quarters. The divestment is expected to be completed by 2QFY18.
  • Pending regulatory approvals, the manager could look to divest certain non-core assets in Singapore.
  • We believe that MLT could seek to acquire sponsor's asset in Tsing Yi (Hong Kong) in the near-term, which is 100% committed. The property value is estimated at S$800m, and could be funded by a mix of debt and equity. Elsewhere, the REIT could look to acquire a small asset in Vietnam, and keep scaling up in Australia.

Capital management

  • Gearing at end-1QFY18 was 39% (4QFY17: 38.5%). Post-completion of the Japanese divestment, gearing could decrease to c.37.5%.
  • MLT has fully refinanced debt due in FY18, resulting in average debt duration extended to 4.0 years (4QFY17: 3.9 years). 
  • All-in borrowing cost was stable qoq at 2.3% p.a. About 79% of total debt is hedged into fixed rates; c.70% of income stream has been hedged into or is derived in Singapore dollars.

Maintain Hold with unchanged DDM-based Target Price S$1.12

  • Hold maintained. MLT trades at 6.3% forward yield and 1.2x current P/BV, which is 1 s.d. above its 5-year mean. 
  • Upside/downside risks hinge on favourable/unfavourable acquisitions and Singapore logistics market.

YEO Zhi Bin CIMB Research | LOCK Mun Yee CIMB Research | http://research.itradecimb.com/ 2017-07-26
CIMB Research SGX Stock Analyst Report HOLD Maintain HOLD 1.120 Same 1.120