Mapletree Logistics Trust - OCBC Investment 2017-07-25: Decent Start To FY18

MAPLETREE LOGISTICS TRUST M44U.SI

Mapletree Logistics Trust - Decent Start To FY18

Mapletree Logistics Trust (MLT) recorded a decent start to FY18, as 1Q gross revenue and NPI grew 7.0% and 7.5% YoY to S$95.8m and S$80.8m, respectively. This was driven by organic growth from Singapore and Hong Kong, acquisitions made in FY17, but partially offset by lower revenue from its Pyeongtaek property in South Korea which was recently converted from a single-user asset (SUA) to a multi-tenanted building (MTB).
NPI margin improved slightly from 84.0% in 1QFY17 to 84.4% due largely to healthy improvement seen in China.
DPU rose 2.0% YoY to 1.887 S cents.
Results were in-line with our expectations as 1QFY18 NPI and DPU constituted 25.1% and 25.3% of our full-year forecasts, respectively.

During the quarter, MLT achieved robust positive rental reversions of 6% on a weighted average basis, underpinned largely by Hong Kong, China, Japan and Vietnam.
Portfolio Occupancy came in at 95.5%, a decline compared to the 96.3% level as at end-FY17. This was attributed mainly to a dip in occupancy in South Korea from 98.4% to 83.3% as a result of the Pyeongtaek property conversion as highlighted earlier. Management is seeking to lease the property out progressively. There were lower vacancies across most of its other markets.
Looking ahead, MLT sees sustained leasing activities across its diversified markets, although we believe the outlook for the Singapore logistics market would remain muted in the near-term given unfavourable demand and supply dynamics. Encouragingly, MLT only has 2.7% of its SUAs (by NLA) which are expiring for the remainder of FY18.

In terms of financial position, MLT’s aggregate leverage ratio stood at 39.0%, as at 30 Jun 2017, leaving it with limited debt headroom to fund acquisitions, in our view. Approximately 79% of its total debt is hedged or drawn in fixed rates.
As for currency hedging, ~70% of its estimated distributable income for FY18 has been hedged or is derived in SGD.
Given the in-line set of results, we maintain our forecasts, HOLD rating and S$1.15 fair value estimate on MLT.

Wong Teck Ching Andy CFA OCBC Investment | http://www.ocbcresearch.com/ 2017-07-25

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