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


Mapletree Logistics Trust - Stable Like A Log On Calm Waters

  • Mapletree Logistics Trust’s 2QFY19 DPU +3.8% y-o-y.
  • Occupancy rose to 97.6%.
  • Moderate rental reversion of 1.3%.

2QFY19 results in-line with our expectations

  • 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.

Firm operating metrics

  • 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.

6.5% FY19F distribution yield, as at 22 Oct close

  • 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
SGX Stock Analyst Report BUY MAINTAIN BUY 1.370 SAME 1.370