Mapletree Logistics Trust - CGS-CIMB Research 2020-01-28: Buying Continues In Japan & South Korea


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

LOCK Mun Yee CGS-CIMB Research | Ervin SEOW CGS-CIMB Research | https://www.cgs-cimb.com 2020-01-28
SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.59 UP 1.56