Mapletree Logistics Trust - Maybank Kim Eng 2019-01-22: Eyeing Stability


Mapletree Logistics Trust - Eyeing Stability

In line, fine-tuning estimates

  • We have fine-tuned estimates following MAPLETREE LOGISTICS TRUST (SGX:M44U)'s in-line 3Q19 results: DPU at SGD2.002 cts brings 9M19 to 75% of our full-year forecasts. We have factored in its three recent deals valued at SGD191.6m in total, whilst adjusting our portfolio metrics to reflect a slower-than-expected quarter in China; our DPUs are kept largely intact.
  • Maintain HOLD and an unchanged DDM-based Target Price of SGD1.30 (COE 7.4%, LTG 1.5%).
  • Our top industrial-sector pick remains the business-park-focused ASCENDAS REAL ESTATE INV TRUST (SGX:A17U), with its stronger balance sheet better able to support potential acquisition growth upside.

Some near-term weakness in China

  • Mapletree Logistics Trust's 3Q revenue and NPI jumped 23% y-o-y and 26% y-o-y, with 9M19 at 71% and 70% of our full-year. This came from
    1. organic growth,
    2. acquisitions (in Australia, S. Korea, with Vietnam pending completion), and
    3. initial contribution from the recently completed re-development of Ouluo Phase 1 in China,
    which helped offset one divestment in Singapore.
  • We expect 4Q to be lifted by further contribution from its acquisition of five Singapore properties that completed on 28 Sep 2018.
  • Portfolio occupancy was steady (at 97.7%) with q-o-q improvements across Singapore, Hong Kong and S.Korea. Mapletree Logistics Trust's China properties reported lower occupancies (down q-o-q from 98.3% to 95.8%), as JD.com downsized its space needs; this should improve in subsequent quarters from backfilling efforts (Mapletree Logistics Trust is targeting local SMEs at higher rentals).
  • Rental reversions at +4.5% were attributable to its assets in Singapore (+2.5%), Hong Kong (+10.5%), China (+3.3%) and Vietnam (+3.0%).

Better visibility in HK, Vietnam, Japan, Australia

  • Management is seeing better visibility in
    1. Hong Kong (at 30% of AUM) where reversions are expected to remain positive,
    2. Japan (12%) for its stable outlook,
    3. Australia (8%) supported by domestic consumption demand, and
    4. Vietnam (1%) where demand should stay robust over the next 6-12 months by spillover gains from the ongoing China-US trade conflict.
  • Mapletree Logistics Trust remains optimistic on the Chinese logistics market, but will be selective on deals (likely targeting first tier cities where demand-side fundamentals are sound) and cautious on the performance of its older assets in Singapore and S.Korea.
  • Demand for newer high-specs logistics properties in Singapore however remain tight against expansion activities including by the likes of Amazon.

Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2019-01-22
SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.300 SAME 1.300