MAPLETREE COMMERCIAL TRUST (SGX:N2IU)
MAPLETREE NORTH ASIA COMM TR (SGX:RW0U)
MAPLETREE INDUSTRIAL TRUST (SGX:ME8U)
MAPLETREE LOGISTICS TRUST (SGX:M44U)
Mapletree Group of REITs - In The Sweet Spot
- Mapletree REITs have sufficient scale to pursue redevelopment but yet any acquisition would still move the needle.
- Good track record and favourable cost of capital conducive for DPU-accretive acquisitions.
- Strong portfolio attributes should weather potentially softer economic environment.
- Maintain BUY calls on
- MAPLETREE COMMERCIAL TRUST (SGX:N2IU) (Target Price S$2.25),
- MAPLETREE INDUSTRIAL TRUST (SGX:ME8U) (Target Price S$2.50),
- MAPLETREE LOGISTICS TRUST (SGX:M44U) (Target Price S$1.85) and
- MAPLETREE NORTH ASIA COMMERCIAL TRUST (SGX:RW0U) (Target Price S$1.65).
At the sweet spot that matters.
- The four Mapletree Group of REITs have total assets of S$4.6-8.1bn which we believe is a sweet spot for investors to remain vested for the longer term.
- This size affords sufficient scale to pursue selective redevelopments (a regular strategy for Mapletree Industrial Trust and Mapletree Logistics Trust) and deliver higher returns without materially affecting their DPU.
- Furthermore, the REITs are in positions to pursue larger-sized acquisitions in the S$500m-1bn range which can still move earnings materially. With S$4.5-6.0bn market cap and daily liquidity of S$12-24m, we believe this also attracts the widest range of investors, thereby translating into tighter yields than their peers.
Justified premium valuations across the Mapletree REITs place them in a virtuous cycle of growth.
- Following the individual listings of the four Mapletree REITs, we found that all have delivered among the top five highest total returns in part due to their consistently delivery of DPU growth (or “certainty of growth”), a trait that goes down well with investors.
- We sense a strong perception amongst investors that their Sponsor is unitholder-friendly which is shown in the premium valuations of the Mapletree-backed REITs. This has led to a favourable cost of capital, which positions all four REITs to pursue accretive acquisitions in the future. This should create a positive virtuous cycle of DPU accretion, leading to higher share prices and greater upside from an M&A strategy.
- On that front, we believe that Mapletree Commercial Trust is now best positioned to acquire next and we now assume that Mapletree Commercial Trust buys Mapletree Business City II. We revise our Target Price to a new street-high Target Price of S$2.25.
Assets to ride cycle.
- Due to the REITs’ ownership of dominant suburban malls (Mapletree Commercial Trust and Mapletree North Asia Commercial Trust), best-in-class business parks (Mapletree Commercial Trust), modern warehouses exposed to e-commerce (Mapletree Logistics Trust), well-located flatted factories or high-spec industrial properties (Mapletree Industrial Trust) and structure growth in data (data centres - Mapletree Industrial Trust), we believe the mix of assets provides the Mapletree REITs upside during property upturns but more importantly, greater downside protection during periods of softer economic activity. Thus, we recommend investors be positioned in the Mapletree names.
Company Guide
Mervin SONG CFA
DBS Group Research
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Derek TAN
DBS Research
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Carmen TAY
DBS Research
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https://www.dbsvickers.com/
2019-07-18
SGX Stock
Analyst Report
2.250
UP
2.00
1.650
UP
1.60
2.500
SAME
2.500
1.850
UP
1.60
