Mapletree Logistics Trust - OCBC Investment 2019-10-22: Targeting Positive Spillover Effects Of Trade War

MAPLETREE LOGISTICS TRUST (SGX:M44U)

Mapletree Logistics Trust - Targeting Positive Spillover Effects Of Trade War

MAPLETREE LOGISTICS TRUST (SGX:M44U) reported an in-line set of 2QFY20 results. See Mapletree Logistics Trust Announcements.
Gross revenue and NPI jumped 14.2% and 21.0% y-o-y to S$121.8m and S$109.1m, respectively. DPU rose at a smaller pace of 3.4% y-o-y to 2.025 S cents due to higher management fees and finance costs.
For 1HFY20, Mapletree Logistics Trust’s gross revenue rose 13.9% to S$241.6m; NPI increased 19.6% to S$215.3m; while DPU improved 3.4% to 4.05 S cents and this formed 50.7% of our FY20 forecast. See Mapletree Logistics Trust Dividend History.

Notwithstanding the vagaries seen in the macroeconomic environment, Mapletree Logistics Trust’s operations remain largely stable. Overall portfolio occupancy was 97.5% (-0.1 ppt q-o-q), as the slight decline in occupancy in China (-1.0 ppt) and South Korea (-0.4 ppt) was offset by an improvement in Hong Kong (+1.6 ppt).
Average rental reversions remained positive at 1.8%, and this was driven largely by Hong Kong (+2.9%), Malaysia (+3.1%) and Vietnam (+3.3%).

Management noted that the ongoing Sino-US trade tensions have resulted in positive spillover effects to some ASEAN markets such as Malaysia and Vietnam, as evidenced by an increase in leasing enquiries. Besides the manufacturing sector, some of the Chinese e-commerce players which have experienced a slowdown in growth in the domestic market have identified ASEAN as another avenue for growth.
Given such opportunities, Mapletree Logistics Trust has proposed to acquire a portfolio of seven modern logistics properties from its sponsor in Malaysia (one), Vietnam (two) and China (50% interest in four properties). The agreed property value of the portfolio is S$406.3m (based on Mapletree Logistics Trust’s stake), and translates into an implied NPI yield of ~6.1% (China: 5.7%; Malaysia: 6.0% and Vietnam: 7.9%).
After incorporating Mapletree Logistics Trust’s recently proposed forward purchase of a warehouse in Truganina, Melbourne, we lift our fair value marginally to S$1.41 from S$1.40.
We have not factored in Mapletree Logistics Trust’s proposed acquisition of the portfolio of assets in Malaysia, Vietnam and China, as this is still pending an EGM approval and the final funding outcome has yet to be finalised.
On a pro forma basis, FY19 DPU is estimated to increase by 1.0%, although we see upside potential to DPU accretion given Mapletree Logistics Trust’s current trading price relative to the S$1.53 illustrative share price used. See Mapletree Logistics Trust Share Price.

OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2019-10-22

SGX Stock Analyst Report SELL MAINTAIN SELL 1.41 UP 1.400