Mapletree Logistics Trust - DBS Research 2020-01-21: Holding Steady Amid Uncertainties


Mapletree Logistics Trust - Holding Steady Amid Uncertainties

  • Resilient operations driven by steady organic growth across key markets.
  • Strong retention rate of 97%; occupancy rates inch higher in Singapore.
  • Debt headroom to undertake acquisitions.
  • Maintain BUY.

What’s New

3Q20 DPU of 2.44 scts (+2.1% y-o-y); YTD of DPU of 6.094 Scts (76% of FY20F forecast).

  • MAPLETREE LOGISTICS TRUST (SGX:M44U)’s revenue and net property income (NPI) increased 0.3% and 3.9% to S$121.1m and S$108.6m respectively. See Mapletree Logistics Trust Announcements. The stronger performance was mainly driven by higher contribution from its existing properties which more than offset the loss of contribution following the divestment of 5 properties in Japan in 1Q20. Topline growth was dragged slightly by weaker currencies (AUD, KRW, RMB against the SGD), mitigated by currency forward contracts entered into for foreign sourced income.
  • Distributable income rose by 6.5% y-o-y to S$76.6m, translating to a DPU of 2.044 Scts (+2.1%). See Mapletree Logistics Trust Dividend History. The lower than proportionate rise in DPU is due to the enlarged share base as a result of a placement exercise undertaken to fund the acquisition of a portfolio of 7 logistics properties in Malaysia, Vietnam and China. The earnings drag is temporary as these properties will start contributing from the subsequent quarter (4QFY20).

Operating metrics remain resilient.

  • Following the recent asset recycling plan to improve its portfolio quality and resiliency, Mapletree Logistics Trust reported a stable occupancy rate of 97.7% (vs 97.5% in 2QFY20) due to higher take-up rates from Singapore which had offset a dip in occupancy rates in South Korea (96.4% in 3QFY20 vs 98.5% in 2QFY20) and China (95.0% in 2QFY20 vs 95.4% in 1QFY20).
  • During the quarter, Mapletree Logistics Trust renewed or replaced leases covering 97% of the 252k sqm of space that was due for expiry with an average rental reversion of 1.2% (vs 1.8% in 2QFY20). This was largely from its Hong Kong, Vietnam and Malaysia properties.

A more cautious outlook.

  • The Manager indicated that tenants are cautious given the uncertain global backdrop with most careful on expansionary plans while some may look to further consolidate their operations to increase cost efficiencies.
  • While this may have an impact in the medium term, we believe that the active asset management strategy undertaken by the Manager to diversify its portfolio and pre-empt such vacancies would enable the REIT to achieve resilience in returns to unitholders.

Borrowing costs lower q-o-q, gearing dipped marginally.

  • Portfolio cost of debt dipped to 2.5% (vs 2.6% in 2QFY20) with a well staggered debt expiry profile of 3.9 years.
  • Gearing increased slightly to 37.5% due to recent acquisitions.

Maintain BUY

Derek TAN DBS Group Research | Singapore Research Team DBS Research | https://www.dbsvickers.com/ 2020-01-21
SGX Stock Analyst Report BUY MAINTAIN BUY 1.900 SAME 1.900