Mapletree Logistics Trust - OCBC Investment 2019-03-07: Logging In Superior Returns


Mapletree Logistics Trust - Logging In Superior Returns

Third best performing S-REIT YTD

  • Including distributions, Mapletree Logistics Trust (SGX:M44U) has delivered superior total returns of 14.4% YTD, ranking it as the third best performing counter in the S-REITs sector (see S-REITs share price performance). Comparatively, the FTSE ST REIT Index and STI have generated 10.2% and 5.2% of total returns YTD, respectively.
  • We continue to like Mapletree Logistics Trust for its resilient portfolio, strong management team and potential for further capital recycling activities to unlock value for unitholders. We roll forward our valuations, and also ascribe a lower cost of equity assumption of 7.5% to take into account a more conducive interest rate environment, but partially offset this by incorporating a more conservative terminal growth rate assumption of 2%.
  • All in, our fair value estimate increases from S$1.40 to S$1.50.

Australia’s logistics sector still bright notwithstanding economic headwinds

  • Mapletree Logistics Trust first penetrated into Australia’s logistics sector in 2015, and currently has 8.3% of its property asset value contributed from Down Under, as at 31 Dec 2018.
  • While there are concerns over headwinds surrounding Australia’s economic growth, fundamentals of the logistics sector remain largely healthy, in our view. This is corroborated by the recent earnings call updates by a number of major local players within this space. For example, during Stockland’s (SGP AU) 1HFY19 earnings call on 20 Feb, it highlighted that it had doubled its logistics segment to a AUD2.5b portfolio over the past six years to the current 16% share of its total group assets, with plans to accelerate this to 25%-35%. GPT Group (GPT AU) also pointed out strong leasing momentum for its six new logistics projects which were completed in the past 1.5 years and is confident of demand for “well-located facilities”. Meanwhile, Goodman Group’s (GMG AU) CEO stressed that structural change in e-commerce globally will drive the logistics sector. He believes that industrials are under-represented in most institutional portfolios and expects to see more growth in the next three to five years.
  • Property consultant CBRE also opined that Australia’s e-commerce industry will inject 350k sqm of additional new supply into Australia’s industrial and logistics space market from 2019 to 2022. As more firms aim for same-day delivery, there would be a surge in demand for logistics spaces in prime locations near consumers.

Wong Teck Ching Andy CFA OCBC Investment Research | https://www.iocbc.com/ 2019-03-07
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