S-REITs Weekly - UOB Kay Hian 2020-04-27: 6.2% Correction After Two Weeks Of Solid Gains

MAPLETREE LOGISTICS TRUST (SGX:M44U)

S-REITs Weekly - 6.2% Correction After Two Weeks Of Solid Gains

S-REITs corrected 6.2% after two weeks of solid gains. Notable losers were retail REITs (Lendlease REIT (SGX:JYEU): -12.3%, Suntec REIT (SGX:T82U): -11.5%, CapitaLand Mall Trust (SGX:C38U): -9.2%, Mapletree North Asia Commercial Trust (SGX:RW0U): -6.5%) and hospitality REITs (ARA US Hospitality Trust (SGX:XZL): -8.9%, Ascott Residence Trust (SGX:HMN): -7.9%, CDL Hospitality Trusts (SGX:J85): -6.3%).

We turn our spotlight on Mapletree Logistics Trust (SGX:M44U) (BUY/Target: S$2.08) which reported good results with DPU growing 1.2% y-o-y. Logistics properties have proven to be more resilient and Mapletree Logistics Trust benefits from stockpiling of essential daily necessities and growth in e-commerce.
Maintain OVERWEIGHT.

UOBKH S-REIT Index corrected 6.2% to 211.7 last week, a retracement after two weeks of solid gains. The results season has started in earnest. See 2020 March Quarter S-REIT Earnings Schedule.
Results from Parkway Life REIT (SGX:C2PU), Keppel REIT (SGX:K71U) and Mapletree Logistics Trust met expectations despite the COVID-19 pandemic.
S-REITs with exposure to retail malls, such as Frasers Centrepoint Trust (SGX:J69U), Mapletree Commercial Trust (SGX:N2IU) and Suntec REIT (SGX:T82U), disappointed by withholding cash.
See S-REITs Share Price Performance.

Keppel DC REIT (SGX:AJBU) gained 0.8% after providing business update with 1Q20 DPU increasing 8.6% y-o-y to 2.085 S cents.
Far East Hospitality Trust (SGX:Q5T) held on to its recent price rebound.

Lendlease REIT (SGX:JYEU), Suntec REIT (SGX:T82U) and ESR REIT (SGX:J91U) corrected 12.3%, 11.5% and 10.0% last week respectively.
- Lendlease REIT withdrew its profit and distribution forecasts set out in its IPO prospectus due to the COVID-19 pandemic.
- Suntec REIT reported lacklustre results with DPU declining 27.7% y-o-y.
- ESR REIT gave back its double-digit price gains recorded last week.

In 1Q20, Mapletree Logistics Trust achieved positive rental reversion of 2.0% while occupancy edged higher by 0.3ppt q-o-q to 98.0% despite the COVID-19 pandemic.

Mapletree Logistics Trust benefits from stockpiling of daily necessities, such as rice, and growth in e-commerce transactions, which accounted for 20-25% of its overall business.

Management does not see the need to withhold distribution. Its cash position is strong at S$151.2m. It has more than S$700m in available committed credit facilities.
Mapletree Logistics Trust is a potential candidate for inclusion into the MSCI Singapore Index. Maintain BUY and target price of S$2.08, based on DDM (required rate of return: 6.0%, terminal growth: 2.0%).
See report: Mapletree Logistics Trust - UOB Kay Hian 2020-04-27: 4QFY20 Resiliency Despite Uncertainties.

Jonathan KOH CFA UOB Kay Hian Research | Peihao LOKE UOB Kay Hian | https://research.uobkayhian.com/ 2020-04-27

SGX Stock Analyst Report BUY MAINTAIN BUY 2.080 SAME 2.080