MAPLETREE LOGISTICS TRUST (SGX:M44U)
Mapletree Logistics Trust - Buying Continues In Japan & South Korea
- MAPLETREE LOGISTICS TRUST (SGX:M44U) is acquiring Kobe Logistics Centre, Japan and DC Deokpyung, Korea for S$272.5m/S$41.4m at implied stabilised yields of c.4.0%/6.4% respectively.
- Both acquisitions are debt-funded and will be accretive to DPU.
- We reiterate HOLD with a higher target price after accounting for the two acquisitions.
Reiterate Hold with a higher target price.
- We update our estimates to account for both acquisitions, leading to a FY20-22F DPU increase of 0.3-2.1% and a revised DDM-based Target Price. See Mapletree Logistics Trust Target Price.
- Both acquisitions will be debt funded; post-acquisitions we estimate that gearing could rise to c.39.5% from 37.1% currently. While we like Mapletree Logistics Trust due to its diversified portfolio of high quality assets, we keep our Hold call as we think present valuations are elevated.
- Upside risks could be major accretive acquisitions and stronger-than-expected rental growth while downside risks include the further depreciation of foreign currencies against the Singapore dollar and escalating trade tensions.
Recycling capital back into Japan
- Mapletree Logistics Trust announced the acquisition of a 98.47% stake in Mapletree Kobe Logistics Centre (‘Kobe’), Japan for a total acquisition cost of S$272.5m. See Mapletree Logistics Trust Announcements. This represents a recycling of capital from the previous sale of five Japanese assets in CY2019 for S$213.3m, in our view. The new property at Kobe is a 102,119 sqm 4-storey facility with double rampways and was completed in Apr 19. It is 99.7% occupied with built-in rental escalations and a weighted average lease expiry of c.4.2 years.
- The Manager has elected to receive an acquisition fee of 0.5% of the effective consideration in the form of units. The acquisition will require unitholders approval as it constitutes an interested person transaction.
Growing in a market with rising demand and limited supply
- Post-acquisition of Kobe, Japan will account for 12% of Mapletree Logistics Trust’s gross revenue from 10% previously.
- Market dynamics in Japan appear positive, in our view, due to structural trends such as Japan being the 2nd largest e-commerce market in Asia Pacific, the popularity of convenience stores, increasing automation and a growing third-party logistics market, all of which require high-specification logistics assets.
- According to Mapletree Logistics Trust, only 5.0% of total warehouse space in Japan is of Grade A specifications and this scarcity has allowed such assets to command a rental premium of 10-30%.
K-wave continues with acquisition in Yongin-Icheon, Korea
- In Jan 20, Mapletree Logistics Trust announced the acquisition of DC Deokpyung, South Korea for c.S$41.4m. See Mapletree Logistics Trust Announcements. The asset comprises four blocks of dry warehouses and has a total gross floor area of 30,485 sqm. The initial net property income (NPI) yield is 5.5% and Mapletree Logistics Trust expects it to generate a stabilised NPI yield of 6.4%.
- The property has a weighted average lease expiry of 6.2 years with built-in rental escalations and is in an area that offers easy accessibility to major expressways providing good access to densely populated areas in the Seoul Metropolitan Area. The acquisition will increase Mapletree Logistics Trust’s exposure to South Korea from 6.1% to 6.6% of gross revenue.
- See Mapletree Logistics Trust Target Price; Mapletree Logistics Trust Latest News.
LOCK Mun Yee
CGS-CIMB Research
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Ervin SEOW
CGS-CIMB Research
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https://www.cgs-cimb.com
2020-01-28
SGX Stock
Analyst Report
1.59
UP
1.56
