Mapletree Logistics Trust - DBS Research 2018-10-29: A Strategic Capture In Brisbane


Mapletree Logistics Trust - A Strategic Capture In Brisbane

  • Mapletree Logistics Trust acquires a prime logistics property in Brisbane, Queensland for A$105m.
  • Initial yield of 5.7% (post-cost yield of 5.3%) appears tight, a reflection of the property’s strong location and quality.
  • Potential upside from further expansion of gross floor area of 19,000 sqm.
  • Estimates unchanged for now, Maintain BUY, Target Price S$1.50.

What’s New

Acquires a prime logistics property in Brisbane.

  • Mapletree Logistics Trust (MLT) has acquired Brisbane, Queensland for A$105.0m (S$102.2m). This will be done through the purchase of the property. The vendor is understood to be Black Goodman.
  • The property enjoys in Queensland and is well located in a Motorway. It is within 28 km to the Central Business District (CBD) and Port of Brisbane and Airport.

Our thoughts

Australia exposure increases to c.8.3%.

  • With this acquisition, Mapletree Logistics Trust’s exposure in Australia will increase to 10 properties worth a total of A$600m, and forms c.8.3% of its portfolio.
  • According to Colliers, the Brisbane industrial market is improving with increasing occupier demand, driven by third party logistics players. Rents have increased by 4.3% y-o-y while market incentives level has remained stable, implying strong demand-supply dynamics.

Fairly tight yield which reflects its prime location and strong tenant.

  • The property is 100% leased to Coles Supermarkets and has a weighted average lease expiry (WALE) of 4.3 years till Jan-23. This property supports Coles’ operations in Queensland and northern New South Wales.
  • The initial yield is 5.7% (c.5.3% post cost yield) and appears tight, but we believe this reflects the property’s prime location.

Potential to increase GFA is positive in the medium term.

  • The property is a single-storey purpose built warehouse with good logistics specifications and cross docking features. The GFA of the warehouse is 55,739 sqm and sits on freehold land of c.151,600 sqm and offers Mapletree Logistics Trust the opportunity to build an additional 19,000 sqm of GFA.
  • Assuming the site is fully built up eventually, we estimate that the yield could rise to 6.2% (assumption of A$110 psm net rent and construction cost of A$850 psm).

Funded by divestment proceeds and debt.

  • Mapletree Logistics Trust intends to fund the acquisition from a combination of proceeds from the recent divestment of 531 Bukit Batok Street 23 in Singapore, cash retained from DRP, and debt. Gearing is estimated to increase marginally to c.38.5%.

Derek TAN DBS Group Research | Mervin SONG CFA DBS Research | Carmen Tay DBS Research | https://www.dbsvickers.com/ 2018-10-29
SGX Stock Analyst Report BUY MAINTAIN BUY 1.500 SAME 1.500