Mapletree Logistics Trust (MLT SP) - DBS Research 2017-10-25: Better Tidings Ahead..

Mapletree Logistics Trust (MLT SP) - DBS Vickers 2017-10-25: Better Tidings Ahead .. MAPLETREE LOGISTICS TRUST M44U.SI

Mapletree Logistics Trust (MLT SP) - Better Tidings Ahead ..

  • Mapletree Logistics Trust (MLT)'s 2Q18 DPU of 1.88 Scts in line with expectations.
  • Steady operational performance with most countries showing improvement in occupancies; rental reversionary trends improving.
  • Recent acquisition of Mapletree Logistics Hub Tsing Yi to underpin a steady growth profile ahead.

What’s New 

1. DPU of 1.88 Scts in line with expectations.

  • Topline and net property income inched up by 2.3% and 2.5% respectively to S$93.7m and S$78.7m in 2QFY18. This is on the back of higher revenue achieved from Hong Kong (without contribution of Mapletree Logistics Hub Tsing Yi), while a successful portfolio optimisation strategy through reinvesting divestment proceeds (3 logistics properties) to higher yielding properties in Australia, Vietnam and Malaysia led to higher portfolio returns. 
  • New acquisitions also more than compensated for the loss of earnings from ongoing redevelopments such as Ouluo Logistics Centre.
  • Borrowing cost increased due to incremental borrowings taken to fund acquisitions, partially offset by lower cost on Japanese loans.
  • Distributable income to unitholders was 3.5% higher at S$48.2m, inclusive of gains from divestments. This translated to a DPU of 1.887 Scts.
  • On a quarter-on-quarter basis, topline and net property income were lower by 2.2% and 2.6% respectively, largely due to a loss of income from divestments, as the acquisition of Mapletree Logistics Hub Tsing Yi was only completed after the end of Sep 2017.

2. Gearing fell to 33.7%; but projected to revert back to c.38% in 3QFY18F.

  • MLT repaid S$356m worth on loans post the preferential offering but gearing will revert back up to c.38% post the acquisition of Mapletree Logistics Hub Tsing Yi.

3. Steady operational performance.

  • Leases for approximately 76,600 sqm of space was renewed or replaced, of which MLT achieved a retention rate of 92%. For leases renewed during the quarter, the rentals achieved were on average 1.4% higher than the preceding rental rates, attributable mainly to Hong Kong and China.
  • Occupancy rates improved on quarter to 95.8% (vs 95.5% last quarter) largely due to back-filling of space form South Korea (84.4% vs 83.3% last quarter). Most countries held on to occupancy rates, a positive sign of better things to come.
  • The Manager continues to see a slow but steady improvement from its Singapore portfolio while other key markets of Hong Kong, Japan and Australia remain stable and are key drivers of topline growth going forward.

Price Target 12-mth: S$1.38 (8% upside)
Rating: BUY

Derek TAN DBS Vickers | Mervin SONG CFA DBS Vickers | Singapore Research Team DBS Vickers | http://www.dbsvickers.com/ 2017-10-25
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 1.38 Same 1.380