Mapletree Logistics Trust - OCBC Investment 2019-07-23: Stable Operations But Expensive Valuations 


Mapletree Logistics Trust - Stable Operations But Expensive Valuations 

  • Mapletree Logistics Trust's 1QFY20 DPU +3.5% y-o-y.
  • Positive rental reversions of 1.8%.
  • Portfolio occupancy down slightly to 97.6%.

1QFY20 results in-line with our expectations

  • MAPLETREE LOGISTICS TRUST (SGX:M44U) reported an in-line set of 1QFY20 results. Gross revenue and NPI jumped 13.6% and 18.2% to S$119.8m and S$106.1m, respectively, with the latter forming 25.4% of our FY19 forecast.
  • Topline growth was driven by redevelopment projects and acquisitions, but partially offset by divestments coupled with a weaker AUD, RMB and KRW relative to the SGD.
  • The adoption of SFRS(I) 16 led to lower land rent by S$2.8m and thus a stronger NPI growth than revenue growth. However, the SFRS(I) 16 has no impact on the total amount distributable to unitholders.
  • Mapletree Logistics Trust's 1QFY20 DPU of 2.025 S cents represented growth of 3.5% and this accounted for 25.3% of our full-year forecast.

Operating metrics largely stable

  • Mapletree Logistics Trust’s overall rental reversions came in stable at +1.8% (FY19: +2%). This was largely driven by China, Hong Kong and Vietnam. There was a slight q-o-q decline in occupancy rates in Singapore (-0.9 ppt), Hong Kong (-1.2 ppt) and South Korea (-0.6 ppt), but partially offset by an improvement in China (+0.9 ppt), such that overall portfolio occupancy had a mild dip of 0.4 ppt to 97.6%.
  • With the uncertain macroeconomic environment, Mapletree Logistics Trust noted that customers have become more cautious on renewals and capacity expansion, although overall leasing demand for warehouse space has been resilient to-date.

Valuations stretched as at 22 Jul close

  • We keep our forecasts unchanged, but lower our risk-free rate assumption from 2.3% to 2.0%. Consequently, our fair value estimate increases from S$1.38 to S$1.40.
  • Based on Bloomberg consensus estimates, Mapletree Logistics Trust is currently trading at a blended forward distribution yield of 5.1% (as at closing price on 22 Jul), which is 2.4 standard deviations (s.d.) below its 8-year average yield of 6.7%. Forward P/B comes in at 1.38x, which is 2.9 s.d. above its 8-year mean of 1.08x.
  • Although the Singapore government 10-year bond yield has also come down from a high of 2.65% in Oct 2018 to 1.95% currently, we note that Mapletree Logistics Trust’s yield spread has compressed to 314 bps, which is also tight as this is 1.9 s.d. lower than the 8-year mean spread of 464 bps.

OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2019-07-23
SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.40 UP 1.380