Mapletree Logistics Trust - UOB Kay Hian 2020-10-21: 2QFY21 Sizeable But Only Marginally Accretive Acquisitions

MAPLETREE LOGISTICS TRUST (SGX:M44U)

Mapletree Logistics Trust - 2QFY21 Sizeable But Only Marginally Accretive Acquisitions

Mapletree Logistics Trust demonstrated resiliency with portfolio occupancy edging higher by 0.3ppt q-o-q to 97.5% while maintaining positive rental reversion at 1.5%.
The acquisitions of 100% of seven properties and a 50% stake in 15 properties in China, one property in Malaysia and one property in Vietnam deepen its presence in core markets. The deals are only marginally accretive to FY20 DPU by 1.3% due to the sizeable equity fundraising exercise.
Maintain HOLD on Mapletree Logistics Trust. Entry price: S$1.88.

Mapletree Logistics Trust (SGX:M44U) reported distributable income of S$78.3m for 2QFY21, up 6.2% y-o-y and in line with our expectations. DPU was 2.055 S cents, up 1.5% y-o-y.

Mapletree Logistics Trust's 2QFY21 gross revenue and net property income (NPI) grew 8.3% and 8.9% y-o-y respectively due to:
1. higher revenue from existing properties;
2. contributions from accretive acquisitions completed in FY20; and
3. initial contribution from the recently-completed Ouluo Logistics Park Phase 2 redevelopment in Shanghai.
This was partially offset by rental rebates granted to eligible tenants impacted by the COVID-19 pandemic and the divestment of one property in China.

Mapletree Logistics Trust has renewed or replaced 2.6m sf of leases in 2QFY21. It achieved positive rental reversion of 1.5%, which was mainly contributed by leases in Hong Kong (+2%), Japan (+1%), Vietnam (+4.3%) and China (+2.4%).

Mapletree Logistics Trust's portfolio occupancy improved slightly by 0.3ppt q-o-q to 97.5% as of Sep 20, reflecting higher occupancy rates in Singapore (+0.7ppt q-o-q to 98.1%), South Korea (+0.1ppt q-o-q to 94.8%) and China (+0.1ppt q-o-q to 92.4%). Occupancies remained at 100% in Australia, Malaysia and Vietnam.
All tenants have resumed operations with the exception of a few tenants in Singapore that accounted for only 0.3% of the revenue base.

Mapletree Logistics Trust has announced the acquisitions of:
1. 100% of seven properties and 50% of 15 properties in China;
2. one property in Malaysia (Port of Tanjong Pelepas); and
3. one property in Vietnam (Bac Ninh) from subsidiaries of sponsor Mapletree Investments.
The implied overall NPI yield is 5.2% (China: 5.1%, Malaysia: 5.4%, Vietnam: 7.25%). These properties are valued at S$1,498.9m, about 1.3% below the valuations by independent valuers.

The acquired properties are located in close proximity to large population catchments and transport infrastructure. This reduces the delivery time and enables Mapletree Logistics Trust to better serve customers’ regional requirements. The acquisitions expand Mapletree Logistics Trust’s network to cover 51 cities in eight geographical markets with a total population base of 150m. In China, Mapletree Logistics Trust is expanding into three new cities, namely Qingdao, Ningbo and Guiyang.
These properties are modern logistics spaces built to Grade A specifications that caters to the needs of e-commerce tenants. There is a limited supply of Grade A logistics space. The Grade A logistics space accounted for 7%, 11% and 21% of warehouse supply in China, Malaysia and Vietnam respectively, compared with 80% for Australia, 63% for the US and 46% for Singapore.
Key tenants include JD.com, Cainiao, Maersk, Kuehne+Nagel and Decathlon. Tenants serving the domestic consumer market accounted for 91% of the acquired properties’ gross revenue while e-commerce and e-fulfilment tenants accounted for 58%. Knight Frank and Colliers International forecast e-commerce logistics CAGR at 15.9%, 15.8% and 23.4% for 2019-24F for China, Malaysia and Vietnam respectively.

The total acquisition outlay of S$1,023.8m is funded by consideration units worth S$300m (29%), new equity funds of S$600m (59%) and S$118.5m of loans (12%). The acquisitions will raise Mapletree Logistics Trust's FY20 DPU by 1.3% and NAV per unit by 6.6%, and reduce aggregate leverage from 39.5% to 37.1%. These numbers assume 153.1m consideration units, as well as private placement and preferential offering of 306.1m units, all issued at S$1.96 each.
The acquisition is subject to approval from unitholders in an EGM.

Jonathan KOH CFA UOB Kay Hian Research | Peihao LOKE UOB Kay Hian | https://research.uobkayhian.com/ 2020-10-21

SGX Stock Analyst Report HOLD MAINTAIN HOLD 2.080 SAME 2.080