Mapletree Logistics Trust - DBS Research 2018-07-24: Continues To Shine

Mapletree Logistics Trust - DBS Group Research Research 2018-07-24: Continues To Shine MAPLETREE LOGISTICS TRUST SGX:M44U

Mapletree Logistics Trust - Continues To Shine

  • 1Q19 DPU accelerated by 3.7% y-o-y to 1.96Scts. 
  • Portfolio metrics remain strong; more upside from acquisitions. 
  • Low gearing level allows the REIT to pursue acquisitions. 
  • Estimates raised to factor in acquisitions; Target Price lifted to S$1.53. 



Maintain BUY, Target Price raised to S$1.53.

  • Mapletree Logistics Trust (MLT) is back on the acquisition path. After its recent announcement to acquire a portfolio of modern logistics properties in Singapore, we remain excited on MLT’s growth prospects. Coupled with a stronger balance sheet post recapitalisation, improving organic growth outlook and a myriad of acquisitions, we believe that the REIT’s improved earnings prospects will translate into higher valuations going forward. 
  • We have raised our Target Price to S$1.53 to account for new acquisitions. BUY! 


Where we differ: Market is not according MLT the right valuation.

  • Our Target Price of S$1.53 is above consensus average of S$1.35. We believe that the street has not accounted for the improved fundamentals post acquisition and potential to surprise on the upside organically and through more acquisitions. 
  • 1Q19 DPU accelerated to 3.7% y-o-y and we believe the momentum will continue in 2H19 with the potential completion of its acquisition of five warehouses in Singapore coupled with a visible acquisition pipeline from its Sponsor. 


Estimates raised to factor in acquisitions.

  • We have assumed in our estimates a fund raising exercise (c.S$233m) to part fund of the S$778m acquisition in Singapore, and distribution of gains from the sale of 7 Tai Seng Drive. Distribution projections are raised by up to 11%, while DPU estimates are raised by c.2% on the back of a higher share base. 
  • Gearing to head to a more optimal c.39%. 


Valuation: 

  • We maintain 15%. 


Key Risks to Our View: 

  • Acquisitions ramping up faster than expected. A faster-than-projected acquisition pace and/or a better-than-expected outlook for the Singapore warehouse market will translate into positive adjustments to our earnings estimates. 


WHAT’S NEW - Continues to Shine


1Q19 DPU +3.7% y-o-y to 1.96 Scts on improving portfolio performance.

  • Mapletree Logistics Trust (MLT)’s gross properties completed over FY18 and 1Q19 (including 7 Tai Seng Drive). 
  • Finance cost increased by c.20.7% y-o-y due to the higher borrowings to partly fund the acquisitions. The strong uplift in distributable income (+29.1% y-o-y) to S$60.9m in 1Q19 was also driven by higher operational performance, and partly boosted by the gains from sale of 7 Tai Seng Drive (S$1.9m over 12 quarters from 1Q FY19) and Toh Tuck Link (S$0.3m over 8 quarters from 2QFY18).
  • 1Q19 DPU of 1.96 Scts (+3.7% y-o-y) formed 25.4% of our FY19F estimates and was in line.

Healthy occupancy, positive reversions.

  • Following the successful acquisition of 11 properties (50% interest) in China, which includes newly completed assets and thus carries a lower occupancy rate of c.91%, MLT’s portfolio occupancy eased slightly on a sequential basis from 96.6% in 4Q18 to 95.7% in 1Q19. Including committed leases, occupancy rate would have been c.97.8% for China and c.97.1% for the MLT portfolio.
  • The uptick in occupancy for its existing portfolio was mainly led by improving take-up rates across MLT’s key markets of Singapore and Hong Kong (100% vs 96.6% in 4Q18).
  • Positive rental reversions averaged 2% in 1Q19, mainly from China, Malaysia and Hong Kong. Singapore’s was fairly flattish.

Borrowing costs crept higher but gearing improved.

  • Portfolio cost of debt nudged higher to 82% vs 78% in the previous quarter.

Earnings update to account for recent acquisitions and gains.

  • Our estimates are raised by 4%-8% to account for the
    1. proposed acquisition of 5 warehouses in Singapore, funded by 30% equity (c. S$233m in our estimates) and
    2. gains from 7 Tai Seng Drive (S$1.9m over 12 quarters), totaling S$22.8m in our estimates.
  • DPU is thus raised by 2% p.a. to 7.9 Scts in FY19F and 8.18 Scts in FY20F.





Derek TAN DBS Group Research Research | Carmen TAY DBS Research | Mervin SONG CFA DBS Research | https://www.dbsvickers.com/ 2018-07-24
SGX Stock Analyst Report BUY Maintain BUY 1.53 Same 1.480



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