Mapletree Logistics Trust (MLT SP) - Maybank Kim Eng 2017-10-25: A Busy Quarter Marked By Tsing-Yi Deal Funding

Mapletree Logistics Trust (MLT SP) - Maybank Kim Eng 2017-10-25: A Busy Quarter Marked By Tsing-Yi Deal Funding MAPLETREE LOGISTICS TRUST M44U.SI

Mapletree Logistics Trust (MLT SP) - A Busy Quarter Marked By Tsing-Yi Deal Funding

2Q18 in line, adjusting for Tsing-Yi 

  • We revised up Mapletree Logistics Trust (MLT)'s FY18-20E revenue and DPUs by 6-12% and 0-1%, respectively, to factor in the Tsing-Yi acquisition, its largest to-date, and following 2Q18 results. 
  • MLT’s 2Q18 DPU of SGD1.89cts, was up 1.5% YoY, flat QoQ, helped by contributions from acquisitions in Australia, Malaysia and Vietnam, which offset divestments in Japan and S’pore, and redevelopment downtime at its China Ouluo Logistics Centre. However, we maintain HOLD with TP revised +5% to SGD1.25, given logistics supply challenges. 
  • Reiterate BUYs on Ascendas REIT (AREIT SP, Rating: BUY, Target Price: SGD2.90) and Mapletree Industrial Trust (MINT SP, Rating: BUY, Target Price: SGD2.05) for their stronger acquisitive growth outlook, as they push on to deliver on their potentially debt-fuelled inorganic growth mandates.

Broad-based operational improvements 

  • The improved performance in 2Q18 was driven by its HK and China assets and acquisitions in Australia, M’sia and Vietnam. 
  • Portfolio occupancy rose QoQ from 95.5% to 95.8% with all geographies reporting stable or improving occupancies. 
  • MLT completed three divestments at SGD180m, and is on track on its redevelopment projects – 76 Pioneer Road targets for 50% pre-commitment by Dec 2017, with MLT guiding for stabilised NPI yield of 6%. 
  • MLT achieved a +1.7% rental reversion, mainly on its assets in S’pore (+0.4%), HK (+3%) and China (+2%). MLT will continue to step hard on capital recycling efforts, with acquisitions focused on its sponsor pipeline or larger third-party assets to deepen its Pan-Asian footprint, or expand into new geographies, possibly India or Indonesia. 
  • MLT is seeing an increasing shift towards end-user demand across its properties from its traditional 3PLs tenants, and hence corresponding shorter WALEs.

Activity up, aggregate leverage from 39% to 38% 

  • Aggregate leverage fell QoQ to 33.7% from 39.0% on its:
    1. SGD640m equity fund raising exercise;
    2. redemption of the SGD350m, 5.375% perpetual securities (perps); and
    3. new SGD180m, 3.65% perps issuance all in Sep 2017. 
  • MLT’s Tsing-Yi acquisition was completed on 12 Oct 2017, thus lifting its aggregate leverage to 38%. MLT further extended average debt maturity to 4.7 years (from 4.0 years) as borrowing costs stayed at 2.3%, with 91% of its total debt hedged into fixed rates and 70% of FY18 income into SGD. 
  • Meanwhile, SGD5.4m gains from divestment proceeds are expected to be distributed over 6-8 quarters from 2Q18.

Maintain HOLD with new SGD1.25 TP 

  • We adjusted our model estimates to factor in the Tsing-Yi acquisition, dilutive effects of its financing initiatives, and lower borrowing costs.
  • NPI margins are expected to stabilise, with minimal subsiding conversion pressures, with single-user assets just 1.8% of expiring leases in FY18. 
  • We have raised revenue by 6-12%, with DPU up 1%. HOLD with new DDM-based SGD1.25 TP.

Chua Su Tye Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2017-10-25
Maybank Kim Eng SGX Stock Analyst Report HOLD Maintain HOLD 1.25 Up 1.190