Mapletree Logistics Trust - DBS Research 2020-07-22: Unfazed By The Storm

MAPLETREE LOGISTICS TRUST (SGX:M44U) | SGinvestors.io MAPLETREE LOGISTICS TRUST (SGX:M44U)

Mapletree Logistics Trust - Unfazed By The Storm

  • Raising acquisition estimates on expectations that Mapletree Logistics Trust can deliver accretive acquisitions.
  • Operating results resilient in a COVID-19-hit quarter; rental rebates lesser than initial expectations.
  • Overall portfolio metrics to ride on structural tailwinds with 25%-30% revenues linked to e-commerce.



Maintain BUY with higher Target Price of S$2.20.

  • We remain positive on Mapletree Logistics Trust (SGX:M44U) and expect the share price to reach new highs.
  • We see Mapletree Logistics Trust to continue riding on the robust demand for logistics properties supporting the accelerated adoption of ecommerce post COVID-19. With supportive structural tailwinds in place, we believe Mapletree Logistics Trust remains well placed to also acquire accretively. We raise our Target Price to S$2.20 as we lower our discount rate assumptions.


Resilient despite the COVID storm


1Q21 DPU of 2.045 Scts (1.0% y-o-y, flat q-o-q).

  • Mapletree Logistics Trust reported a 10.5% and 12.0% rise in revenues and net property income (NPI) to S$132.4m and S$118.8m respectively. Higher revenue was generated from its existing properties, fuelled by new contributions from properties acquired in Malaysia, Vietnam, South Korea and Japan. This more than offset the contribution from its 6 divestments and rental rebates incurred in the quarter granted to eligible tenants due to the COVID-19 pandemic.
  • Distributable income rose by 5.2% y-o-y to S$77.8m (or S$82.0m before) after stripping off coupons to perpetual security holders. The lower y-o-y increase in DPU is mainly due to the increase in units issue of roughly c.4.6% on a y-o-y basis.
  • On a q-o-q basis, Mapletree Logistics Trust's DPU is flattish largely due to rental rebates incurred in 1QFY21 vs. a quarter ago. This is on the back of a 3.6% increase in NPI to S$118.8m (+4.6% or S$4.1m), offset by higher borrowing costs (+8.4% or +S$2.5m) to S$21.6m and lower contribution from JV ( -72% or -S$6.4m) q-o-q to S$2.4m. 4QFY20 JV results were boosted by almost c.S$5.0m in revaluation gains.

Balance sheet metrics stable; interest and currency hedges in place.

  • Mapletree Logistics Trust's gearing stayed stable at 39.6% (vs. 39.3% a quarter ago), which accounted for incremental debt to fund its acquisition activities. Interest rates declined to 2.3% (vs. 2.5% a quarter ago) with 80% of its debt hedged into fixed rates. Currency hedges remain consistently high at c.78% of the income stream in the next 12 months.


Outlook


Delivery of strong growth momentum despite a subdued quarter.

  • While the past quarter was likely the worst quarter for most listed REITS, Mapletree Logistics Trust put up a creditable performance. Mapletree Logistics Trust estimates to incur up to S$5m-10m of rental rebates as assistance for its tenants in FY21F. Assuming these sums are incurred in the quarter, operational results would have been 5.0% points – 9.0% points higher and 1QFY21 DPU a tad higher y-o-y.

Slight dip in occupancy rates expected; but overall operating metrics remain resilient.

  • Mapletree Logistics Trust occupancy rates dipped marginally to 97.2% (vs. 98.0% in 3QFY20). The dip was mainly coming from Korea (94.7% in 1QFY21 vs. 96.0% in 4QFY20) and China (92.3% in 1QFY21 vs. 96.3% in 4QFY20) which is attributable to transitional movements owing to COVID-19 outbreak while the completion of Ouluo Phase 2 (completed in May’2020) which is c.44% pre-committed may have contributed to the dip in vacancy rates.
  • During the quarter, Mapletree Logistics Trust renewed or replaced leases at an average rental reversion of 1.9%, which is stable compared to the c.2.0% a quarter ago. This mainly came from its Hong Kong, China, Vietnam and Malaysia properties.

A COVID-19 resilient sector; but manager maintains a cautious stance.

  • The manager is seeing continued cautiousness amongst its tenants given the COVID-19 which has disrupted supply chains amid lock-downs across various countries, to curb the spread of the coronavirus. We understand that all of its tenants have resumed operations except 1.3% of Mapletree Logistics Trust’s revenue base. With a diversified portfolio in geography and tenant trade sector, we remain confident that Mapletree Logistics Trust can continue to deliver stable returns despite the fragile economic outlook in the near term.
  • Recent acquisition of a property in Brisbane (A$21.3m) will contribute from 3QFY21, providing the REIT with a stable growth profile.


Recommendation


Acquisition momentum to drive further upside; Target Price raised to S$2.20.






Derek TAN DBS Group Research | Dale LAI DBS Research | https://www.dbsvickers.com/ 2020-07-22
SGX Stock Analyst Report BUY MAINTAIN BUY 2.20 UP 2.050



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