Mapletree Logistics Trust - OCBC Investment 2018-10-23: Stable Like A Log On Calm Waters

MAPLETREE LOGISTICS TRUST (SGX:M44U)

Mapletree Logistics Trust - Stable Like A Log On Calm Waters

Mapletree Logistics Trust (MLT) reported a healthy set of 2QFY19 results which met our expectations. Gross revenue and NPI jumped 13.8% and 14.6% y-o-y to S$106.6m and S$90.2m, respectively. This was boosted by organic growth from its existing portfolio and two recent acquisitions in Hong Kong.

2QFY19 DPU grew at a smaller pace of 3.8% y-o-y to 1.958 S cents, due to higher borrowing costs to finance the acquisitions and an enlarged unit base (private placement exercise, Distribution Reinvestment Plan and higher management fees in units).
For 1HFY19, Mapletree Logistics Trust’s NPI increased 11.9% to S$212.1m, while DPU of 3.915 S cents represented growth of 3.7%, and this formed 49.3% of our FY18 projection.

Operationally, Mapletree Logistics Trust’s occupancy increased from 95.7% in 1QFY19 to 97.6%. This was boosted mainly by China, which saw a 7.3 ppt q-o-q ramp up in occupancy, as some of the space was previously pre-committed but not physically occupied.
With the exception of Hong Kong (100% to 98.6%), all other markets either saw an increase or maintained their occupancy levels.
Rental reversions were more moderate, coming in at 1.3% in 2QFY19, versus 2.0% in 1QFY19.

Following the recent completion of the acquisition of five modern ramp-up logistics properties in Singapore from CWT Pte Ltd, Singapore now constitutes 33.0% of Mapletree Logistics Trust’s property asset value (as at 30 Sep 2018), with Hong Kong coming in second at 30.4%.
While there are concerns over the escalating trade tensions between U.S. and China, we note that China formed only 8.2% of Mapletree Logistics Trust’s property asset value. Moreover, we believe a number of the assets are backed by strong underlying tenants such as JD.com and Cainiao Smart Logistics Network Limited, which offer exposure to the domestic e-commerce sector.
In terms of capital management, ~80% of Mapletree Logistics Trust’s total debt has been hedged into fixed rates and ~84% of its income stream for FY19 has been hedged into or is derived in SGD.
Based on a closing price of S$1.23 on 22 Oct 2018, Mapletree Logistics Trust is trading at a decent distribution yield of 6.5% for FY19F. Our fair value remains intact at S$1.37.

Wong Teck Ching Andy CFA OCBC Investment Research | https://www.iocbc.com/ 2018-10-23

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