Mapletree Logistics Trust - DBS Research 2019-07-18: Spreading Its Reach

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MAPLETREE LOGISTICS TRUST (SGX:M44U)

Mapletree Logistics Trust - Spreading Its Reach

• Acquisitions to drive upside in DPUs; war chest from recent divestments and gearing headroom.
• More flexibility to optimise balance sheet in the medium term given higher gearing limits proposed by MAS.
• Upside to Target Price and earnings if Mapletree Logistics Trust takes on a more aggressive growth stance.

Unrivalled market leader; maintain BUY with higher Target Price.

• We believe that all growth engines are firing and MAPLETREE LOGISTICS TRUST (SGX:M44U) remains firmly on the acquisition growth path.
• Well-timed acquisitions and ongoing asset reconstitution strategy is projected to augment a steady DPU growth profile of c.3.0% CAGR over FY20-21F with upside from potential gains that the manager will typically share when it happens. With interest rates staying lower for longer, we expect investors to remain keenly vested.
• Maintain BUY with a higher Target Price of S$1.85.

Where we differ: Deserves to trade at a premium.

• Mapletree Logistics Trust’s major markets continue to offer organic growth while the manager remains on the hunt for more value-accretive acquisitions. Our Target Price of S$1.85 is above consensus and we believe the street has not factored the REIT’s potential to surprise on the upside organically and through more acquisitions or recycling its capital through divestments.
• Mapletree Logistics Trust, through its focus on its key markets of Hong Kong, Singapore, Japan and Australia, offers stronger income visibility and growth than before.

Estimates raised to factor in acquisitions.

• We have assumed S$500m of acquisitions in FY20 funded by debt and divestments and this is not priced in by consensus at this point. Opportunities will likely come from its Sponsor which has an extensive pipeline of acquisition opportunities.

Valuation:

• We maintain our BUY call with a higher Target Price of S$1.85 as we assume lower discount rates.

Key Risks to Our View:

• Acquisitions ramping up faster than expected. A faster-than-projected acquisition pace and/or a better-than-expected outlook for the Singapore warehouse market will translate into positive adjustments to our earnings estimates.

Derek TAN DBS Group Research | Carmen TAY DBS Research | Mervin SONG CFA DBS Research | https://www.dbsvickers.com/ 2019-07-18

SGX Stock Analyst Report BUY MAINTAIN BUY 1.85 UP 1.600