Mapletree Logistics Trust - UOB Kay Hian 2018-04-27: 4QFY18 Results Of MLT In Line

Mapletree Logistics Trust - UOB Kay Hian 2018-04-27: 4QFY18 Results Of MLT In Line MAPLETREE LOGISTICS TRUST M44U.SI

Mapletree Logistics Trust - 4QFY18 Results Of MLT In Line

  • Results of Mapletree Logistics Trust (MLT) is in line with expectations.
  • MLT saw organic growth from its existing portfolio, contributions from new acquisitions and redevelopments.
  • MLT also proposed an acquisition of 11 logistics properties in China for Rmb1,021.6m.
  • Maintain HOLD with unchanged target price of S$1.41.



ACTION

  • Results in line with expectations, maintain HOLD with target price of S$1.41, based on DDM (required rate of return: 6.7%, 2.0%). 
  • Mapletree Logistics Trust (MLT) reported 4QFY18 DPU of 1.937 S cents/share (+4.1% y-o-y, +1.6% q-o-q), bringing FY18 DPU to 7.618 S cents, up 2.4% y-o-y. 
  • FY18 gross revenue was up 5.9% to S$395.2m and NPI was up 6.9% to S$333.8m. The improved 4QFY18 results was driven by organic growth from the existing portfolio, initial contribution from a newly completed redevelopment in Singapore, contributions from acquisitions, but these were partially offset by absence of contributions from four divestments and one of two blocks under redevelopment in Ouluo Logistics Centre, China. 
  • The results were within expectations, with FY18 DPU representing 100.1% of our full-year estimates.


STOCK IMPACT

  • Overall occupancy rose to 96.6% in 4QFY18 (+0.4ppt q-o-q), due to higher occupancies in Singapore, South Korea, and China. Japan, Australia, Malaysia, and Vietnam maintained full occupancies (100%), compared with last quarter.
  • FY18 portfolio rental reversions came in at 2.6%, from the 6.99m sf of space renewed for the year.
  • Gearing decreased marginally by 0.1ppt q-o-q to 37.7% in 4QFY18, as incremental borrowings were drawn to fund acquisition and asset enhancements.
  • Pro-active leasing efforts resulting in well-spread out lease expiry profile with 24.4% and 20.1% of total leases by NLA expiring in FY19 and FY20 respectively. Single user asset (SUA) leases account for 4.6% and 5.7% of leases due in FY18 and FY19 respectively.
  • Industrial rents still declining in Singapore amid signs of stabilisation. Industrial rents weakened across the board on a q-o-q and y-o-y basis, with the sharpest decline in upper floor factory rents (-5.3% y-o-y and -0.8% q-o-q), according to CBRE. However, they noted that leasing demand has been improving, led by the semiconductor, e-commerce and aerospace industries. Industrial forward supply has also moderated to about 9.14m sf in 2018 (vs 20.9m sf in 2017). The better demand-supply dynamics is expected to improve occupancies, and allow rents to stabilise over the course of 2018.
  • Outlook for logistics space in Singapore, Hong Kong and others. The Singapore leasing market remains competitive in the near term (and it takes time for vacant warehouse space to be absorbed by the market), but new supply is expected to taper in the future years. Meanwhile, Hong Kong continues to enjoy favourable supply-demand dynamics, which will support rents and high occupancies. MLT’s portfolios in Japan and Australia are expected to remain stable, due to the long leases and 100% full occupancy.
  • Despite management guiding for healthy demand for logistics properties across its diversified market due to continued economic growth, they have also cautioned on the possible escalation in trade tension, as well as faster-than-expected quantitative tightening in advanced economies, which may temper this expected growth.
  • Proposed acquisition of 50% stake in 11 logistics properties in China for Rmb1,021.6m (S$212.8m). The 11 properties are modern Grade-A logistics facilities developed by the Sponsor, with portfolio median age of 1.7years, aggregated NLA of 8.85m sf, enjoying occupancy of 97.7% and WALE of 3.3 years, and has an implied NPI yield of 6.4% (ie 20bp above MLT’s existing China portfolio).
  • Acquisition is immediate yield accretive. The transaction is expected to boost FY17/18 (12 months from 1 Apr 17 – 31 Mar 18) DPU by 0.4%, to 7.650 S cents. The aggregated agreed property value of the properties of Rmb2,846.8m (S$593m) also represents a discount of 1.7% and 3.7% to independent valuations, by Colliers International and JLL.
  • Acquisition cost of Rmb1,021.6m (S$212.8m) funded by a mix of equity and debt. For illustration, the acquisition cost comprises an acquisition price of Rmb985.3m (S$205.3m), acquisition fee of S$1m, and professional and other fees and expenses of S$6.5m.
  • The acquisition may be funded by equity fund raising of S$200m, and the remainder (S$11.8m) using MLT’s bank facilities. Another 0.9m acquisition fee units will also be issued at price of c.S$1.20.
  • Post-acquisition, China will make up 9% and 11% of the enlarged portfolio’s valuation and FY17/18 NPI respectively, on a pro forma basis. The aggregate exposure to the top 10 tenants (by gross revenue) will reduce from 23% to 21.6%. Assuming ML raises S$200m gross proceeds (with illustrative price of S$1.20 per new unit), MLT’s free float would also increase by 8.5% to S$2,560.2m.





Vikrant Pandey UOB Kay Hian | Loke Peihao UOB Kay Hian | http://research.uobkayhian.com/ 2018-04-27
SGX Stock Analyst Report HOLD Maintain HOLD 1.410 Same 1.410



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