Mapletree Logistics Trust - OCBC Investment 2018-04-30: Growing Its E-commerce Pie

Mapletree Logistics Trust - OCBC Investment 2018-04-30: Growing Its E-commerce Pie MAPLETREE LOGISTICS TRUST M44U.SI

Mapletree Logistics Trust - Growing Its E-commerce Pie

  • Mapletree Logistics Trust (MLT) 4QFY18 DPU grew 4.1% y-o-y.
  • Cross-selling opportunities.
  • Longer-term benefits from proposed acquisition.

4QFY18 results met expectations

  • Mapletree Logistics Trust (MLT) reported its 4QFY18 results which met our expectations. Gross revenue and NPI jumped 11.4% and 13.7% y-o-y to S$107.5m and S$91.3m, respectively.
  • Due to an enlarged unit base and higher finance costs, DPU grew at a smaller magnitude of 4.1% y-o-y to 1.937 S cents. 
  • On a full-year basis, MLT’s gross revenue and NPI rose 5.9% and 6.9% to S$395.2m and S$333.8m, respectively, with the latter forming 98.4% of our FY18 forecast. DPU of 7.618 S cents (+2.4%) closely matched our 7.60 S cents projection.

Proposed acquisition of 50% interest in 11 properties in China

  • Separately, MLT also announced the proposed acquisition of a 50% indirect interest in 11 logistics properties in China for an approximate price of RMB985.3m (S$205.3m). Its sponsor Mapletree Investments Pte Ltd will hold the remaining 50% interest in the properties. The implied NPI yield is estimated to be 6.4%, based on the aggregate agreed property value. 
  • The top tenants for this portfolio include JD.com, Cainiao Smart Logistics Network Limited and Sinotrans Limited
  • We were initially lukewarm over this proposed transaction in the near-term, given the estimated pro forma DPU accretion of only 0.4% (possibly even dilutive in the first year if issuance price for its equity fund raising exercise falls below its S$1.20 illustrative issuance price), while there are also uncertainties over the ongoing trade tensions between China and the U.S. However, management highlighted that one of its key strategies would be cross selling opportunities as a number of tenants from this acquisition are interested to expand in South- East Asia. 
  • It may also be able to benefit from higher Grade A warehouse rental growth of 2.7%-5.1% in 2018 and 3.5%-5.9% in 2019 for the 11 Chinese cities where the proposed acquisition properties are located, according to an independent market research consultant. Furthermore, the proportion of overall gross revenue from e-commerce related tenants will increase from 24% to ~26% post completion of this acquisition. 
  • We fine-tune our assumptions and now factor in lower distributions from the divestment gains from 7 Tai Seng Drive. Our fair value inches down from S$1.48 to S$1.44.

Wong Teck Ching Andy CFA OCBC Investment | http://www.iocbc.com/ 2018-04-30
SGX Stock Analyst Report BUY Maintain BUY 1.44 Down 1.480