Mapletree Logistics Trust - OCBC Investment 2017-10-24: Continuing Its Portfolio Rejuvenation

Mapletree Logistics Trust - OCBC Investment 2017-10-24: Continuing Its Portfolio Rejuvenation MAPLETREE LOGISTICS TRUST M44U.SI

Mapletree Logistics Trust - Continuing Its Portfolio Rejuvenation

  • 2QFY18 DPU grew 1.5% YoY.
  • Rental reversion of 1.4%.
  • Slight uptick in portfolio occupancy.

2QFY18 results met our expectations 

  • Mapletree Logistics Trust (MLT) reported its 2QFY18 results which met our expectations.
  • Gross revenue and NPI grew 2.3% and 2.5% YoY to S$93.7m and S$78.7m, respectively. DPU improved by 1.5% YoY to 1.887 S cents. This comprises an advanced distribution of 1.706 S cents (period from 1 Jul to 21 Sep 2017) which has already traded ex-dividend on 19 Sep and a remaining 0.181 S cents DPU (period from 22 Sep to 30 Sep 2017) which will be paid with the 3QFY18 distribution in Feb 2018. 
  • On a 1HFY18 basis, MLT’s gross revenue rose 4.6% to S$189.5m and its NPI jumped 5.0% to S$159.6m, with the latter forming 47.0% of our FY18 forecast. DPU of 3.774 S cents represented growth of 1.7% and constituted 49.7% of our full-year projection.

Rental reversions moderated during the quarter 

  • Management delivered positive rental reversions of 1.4% in 2QFY18, mainly due to strength from Hong Kong and China. This was, however, a moderation from the 6% rental reversion achieved in 1QFY18. 
  • Overall portfolio occupancy inched up slightly from 95.5% (as at 30 Jun 2017) to 95.8%, with all its markets registering either improved or unchanged occupancy.
  • Looking ahead, MLT continues to see sustained leasing activities across its markets, although supply pressures in Singapore are likely to hamper the recovery process. Management has thus been diversifying its exposure into other geographies.

Rejuvenating its portfolio; maintain BUY 

  • During 2QFY18, MLT completed the divestments of three properties, namely Zama Centre and Shiroishi Centre in Japan and 4 Toh Tuck Link in Singapore. The combined divestment gains of ~S$5.4m will be distributed to unitholders over six to eight quarters, while the proceeds received will be redeployed into its asset enhancement initiatives and inorganic growth opportunities.
  • MLT’s ~HK$4.8b acquisition of Mapletree Logistics Hub Tsing Yi in Hong Kong at an initial NPI yield of 5.7% from its sponsor was completed on 12 Oct. Thereafter, its aggregate leverage ratio has increased from 33.7% (as at 30 Sep 2017) to ~38%. 
  • We retain our forecasts, BUY rating and S$1.35 fair value estimate on MLT.

Wong Teck Ching Andy CFA OCBC Investment | http://www.ocbcresearch.com/ 2017-10-24
OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 1.350 Same 1.350