Mapletree Logistics Trust - UOB Kay Hian 2020-03-04: Less Affected By COVID-19 Outbreak; Upgrade To BUY


Mapletree Logistics Trust - Less Affected By COVID-19 Outbreak Due To Orientation Towards Domestic Consumption And E-commerce; Upgrade To BUY

  • Mapletree Logistics Trust is less affected by the COVID-19 outbreak due to its orientation towards domestic consumption and e-commerce, which accounted for 70-75% and 20-25% of its business respectively. The exposure to domestic consumption and e-commerce is even higher at 85% and 50-55% for its China portfolio.
  • Mapletree Logistics Trust is a potential candidate for inclusion in the MSCI Singapore Index.
  • We would not rule out a merger with sister S-REIT Mapletree Industrial Trust over the longer term.
  • Upgrade to BUY with a higher target price of S$2.08.


Plugged into growth in domestic consumption in Asia Pacific.

  • Mapletree Logistics Trust (SGX:M44U) has 143 logistics properties spread across eight key markets, namely Singapore, Hong Kong, Japan, China, Australia, South Korea, Malaysia and Vietnam. Management gauges that Mapletree Logistics Trust’s exposure to domestic consumption, such as food & beverage, consumer durables and healthcare products, is 70-75% of its business (only 25-30% its business is related to export-oriented activities).

Shielded by orientation towards e-commerce.

  • E-commerce accounted for 20-25% of Mapletree Logistics Trust’s business. E-commerce occupiers typically require up to three times as much distribution space compared to traditional retailers due to extensive product range, greater inventory levels, larger outbound shipping space, higher inventory levels, larger outbound shipping space and increased reverse logistics.
  • Logistics properties with modern specifications, which cater to the needs of e-commerce players, accounted for 58% of Mapletree Logistics Trust’s portfolio NLA.

Moderation in growth for Greater China.

  • Greater China accounted for 38.4% of Mapletree Logistics Trust’s portfolio valuation and 33.7% of gross revenue as of 3QFY20.
  • Hong Kong: Rental reversion to moderate.
    • The government has re-introduced the industrial building revitalisation scheme in 2018, a policy that removed 17.8m sf of industrial space when last implemented in 2010-16. The scheme stimulates conversion of aged industrial buildings into office, retail and hotel use. Thus, supply of industrial space, including logistics space, is tight.
    • Hong Kong has weathered many months of social unrest, followed by the outbreak of COVID-19. Mapletree Logistics Trust’s Hong Kong portfolio has achieved positive rental reversion of 5.8% for FY19 and 3.5% for 9MFY20. Rental reversion is expected to further moderate due to slower growth in domestic consumption going forward.
  • China: Near-term weakness in midwestern region mitigated by orientation towards e-commerce.
    • However, there are pockets of weakness at the Northern and Midwestern sub-markets due to high supply of warehouse space in the near term. We estimate Midwestern and Northern markets accounted for 26.2% and 1.6% respectively for Mapletree Logistics Trust’s China portfolio valuation. In particular, the Midwestern market is affected by the outbreak of COVID-19 due to geographical proximity to Hubei Province.
    • The acquisition of 50% stake in 11 logistics properties in Jun 18 has increased Mapletree Logistics Trust’s e-commerce revenue exposure in China from 18% to 42%. E-commerce revenue exposure has further expanded to 50-55% post acquisition of 50% stake in four logistics properties in Dec 19. According to McKinsey, China’s online retail sales have grown at 2017-19 CAGR of 24% to reach US$1.5t in 2019. In China, Mapletree Logistics Trust’s exposure to domestic consumption is 85%, which is less affected by the outbreak of Covid-19.

Inorganic expansion, including sponsor acquisitions.

  • Mapletree Logistics Trust will explore opportunities to scale up in China, Japan, Malaysia and Vietnam, including acquiring logistics assets from sponsor Mapletree Investments. Management has identified sponsor pipeline with 4.6m sf of logistics space in China, Malaysia and Vietnam (completed: 1.9m sf, development projects: 2.7m sf) worth S$3.5b.
  • As part of its asset reconstitution strategy, Mapletree Logistics Trust has also earmarked logistics properties with older specifications worth S$500m for potential divestment.


Potential to be included in MSCI Singapore Index.

Potential merger between Mapletree Logistics Trust and Mapletree Industrial Trust?

Both S-REITs are in the growth phase on acquisition trail.


  • We forecast DPU of 8.1 S cents for FY20 and 8.4 S cents for FY21.



  • Positive newsflow on rental reversions and occupancy for logistics properties.

Jonathan KOH CFA UOB Kay Hian Research | Peihao LOKE UOB Kay Hian | https://research.uobkayhian.com/ 2020-03-04
SGX Stock Analyst Report BUY UPGRADE HOLD 2.08 UP 1.650