Mapletree Logistics Trust - Maybank Kim Eng 2020-01-28: Adding In Japan


Mapletree Logistics Trust - Adding In Japan

New debt-funded asset; maintain HOLD

  • Mapletree Logistics Trust (SGX:M44U) will deepen its Japanese AUM with its latest SGD272.5m acquisition in Kobe from its sponsor at 4.0% NPI yield. The freehold, modern logistics facility should see positive income growth fundamentals supported by secular demand drivers and limited supply. We will revise estimates following the deal closure expected by Mar 2020.
  • For now, management is guiding for 2.6% DPU accretion (on a pro-forma basis), helped by its low 0.9% JPY debt funding cost. Its leverage however rises from 37.1% to 39.0%, thus limiting further acquisition growth upside in the near term.
  • Stay at HOLD with DDM-based SGD1.75 Target Price (COE: 6.7%, LTG: 2.0%).
  • We prefer Ascendas REIT (SGX:A17U) (BUY, Target Price SGD3.35) and Mapletree Industrial Trust (SGX:ME8U) (BUY, Target Price SGD2.95) within the industrial REITs space.

Acquires Japan asset from sponsor at 4.0% NPI yield

  • Mapletree Logistics Trust will acquire from its sponsor a 98.5% interest in the Kobe Logistics Centre for JPY22.2b (SGD272.5m). This is a freehold, well-connected, prime Grade A logistics facility that was completed in Apr 2019. It is 99.7% occupied with WALE (by NLA) at 4.2 years as of 21 Jan 2020, and boasts the best specifications against peers within the vicinity (with its double ramp-ways and large 21,000 sqm floor plates) according to CBRE.
  • Its tenancies are backed by seven diversified, reputable names – six are new to its portfolio, with the majority servicing consumer-related goods. Income visibility will be supported by its lease structures, which are at +1-3% pa on half of its leases (by NLA).

Market fundamentals favourable

  • We see favourable demand-supply dynamics in Japan over the medium term, helped by growing e-commerce, high convenience store popularity, and its expanding 3PL market. These, together with limited modern logistics supply in the Greater Osaka and the Tokyo Metropolitan area (at 4.2% and 5.6% of total stock) have pushed vacancies down from 14.3% and 4.5% in 1Q18 to 4.0% and 1.8% respectively in 3Q19.

Leveraging up again – gearing rises to 39.0%

Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2020-01-28
SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.750 SAME 1.750