Mapletree Logistics Trust - CGS-CIMB Research 2018-07-24: Acquisition Momentum Continues

MAPLETREE LOGISTICS TRUST SGX:M44U

Mapletree Logistics Trust (MLT) - Acquisition Momentum Continues

Mapletree Logistics Trust's 1QFY3/19 DPU within expectation, at 25% of our FY3/19 forecast.
Bottomline boost from organic revenue improvement and new acquisitions.
More contributions from China from 2QFY19F onwards.
Singapore portfolio to be rejuvenated, pending completion of proposed transaction.
Maintain ADD with unchanged Target Price of S$1.39.

Mapletree Logistics Trust (MLT) reported 1QFY3/19 revenue of S$105.4m, up 10% y-o-y, while NPI improved 11% y-o-y to S$89.8m, thanks to higher revenue from existing properties and acquisition in Hong Kong, albeit partly offset by income vacuum from divestment of five assets and weaker HK$ and yen. io.
1Q DPU rose 3.7%

Portfolio occupancy slipped a slight 0.9% to 95.7%, dragged down by lower Singapore, South Korea, and Vietnam take-up as well as inclusion of occupancy of its 50%-owned JV China portfolio.
Including pre-commitments of the latter, overall portfolio occupancy would have been 97.1%, up q-o-q. The trust achieved positive rental reversion of 2.1% during the quarter, led by HK, China and Malaysia while Singapore renewals remained fairly flat. io.

1QFY3/19 was an active quarter with MLT announcing two major transactions – the first was the acquisition of a 50% stake in 11 China properties from its sponsor for c.Rmb1.4bn (S$296.5m), completed in Jun. We expect the positive boost from this purchase to be felt from 2QFY3/19F onwards.

MLT also proposed the purchase of 5 Singapore ramp-up properties from CWT International for S$730m (all-in cost S$778.3m inclusive of an upfront land premium of S$48.3m). The deal is subject to approvals from relevant authorities and CWT shareholders. io.
The acquisition NPI yield of 36.4%, we anticipate this purchase to be funded by a combination of debt and equity as well as potential monetisation of some older assets. io.
Post purchase, Singapore would account for c.33% of assets under management (AUM) and c.41% of revenue. Our current DPU projections have not included any impact from this acquisition.

We tweak our Asia Pacific logistics story. io.
Income visibility is strong with 82% of its interest rates fixed and c.73% of its amount distributable for FY19F hedged or in S$.
Potential re-rating catalysts are accretive new acquisitions that would continue to drive DPU growth. io.
Downside risks include rising trade tension.

LOCK Mun Yee CGS-CIMB Research | EING Kar Mei CFA CGS-CIMB Research | https://research.itradecimb.com/ 2018-07-24

SGX Stock Analyst Report ADD Maintain ADD 1.390 Same 1.390