Mapletree Logistics Trust - OCBC Investment 2020-12-16: Forsake Me Not

MAPLETREE LOGISTICS TRUST (SGX:M44U)

Mapletree Logistics Trust - Forsake Me Not

Mapletree Logistics Trust's share price has underperformed following positive vaccine news.
Still a beneficiary of structural tailwinds.
Update estimates and raise Mapletree Logistics Trust's fair value to S$2.12.

Mapletree Logistics Trust's share price has depreciated 7.7% (as at 15 Dec close) since positive vaccine news first emerged from Pfizer and BioNTech on 9 Nov, as compared to the FTSE ST REIT Index’s 2.2% gain. We believe this underperformance has been driven by a rotation to value and laggards from growth and outperformers.

While this rotation play may continue in the near-term on continued positive vaccine developments, we believe Mapletree Logistics Trust's share price weakness does present a buying opportunity for investors with a medium to longer-term horizon, as we see Mapletree Logistics Trust as a beneficiary of structural tailwinds from rising e-commerce penetration rates in the region.
As a recap, Mapletree Logistics Trust (SGX:M44U)’s operational and financial performance has been resilient despite the debilitating effects of COVID-19. Its rental reversions and occupancy rates have remained firm, while DPU grew 1.2% for 1HFY21.

COVID-19 has undoubtedly accelerated the shift towards an increase in online consumption and thus e-commerce penetration rates. Another trend which has emerged is the shift from “Just-in-Time” to “Just-in-Case”, which means that retailers and businesses are looking to increase their inventory to serve as safety stock in the event of supply chain disruptions. These trends would likely underpin the demand for more warehouse space ahead.

To capitalise on these trends, management has been proactive in driving Mapletree Logistics Trust’s inorganic growth, and it recently completed the acquisitions of the remaining 50% interest in 15 properties and a 100% interest in seven properties in PRC, one property in Vietnam and one in Brisbane, Australia. Mapletree Logistics Trust is still awaiting the completion of a proposed acquisition in Malaysia. The expected initial NPI yields are 4.9% in Australia, 5.1% in China, 5.4% in Malaysia and 7.3% in Vietnam.
Mapletree Logistics Trust managed to price its recent equity fund raising for these acquisitions at the top-end of its initial guidance, and raised gross proceeds of ~S$644.1m. We estimate that its gearing ratio will reach 37.7% by end-FY21, and this leaves it with further debt headroom to fund more smaller sized acquisitions.
After factoring in Mapletree Logistics Trust’s latest developments, we lower our FY21F DPU forecast by 0.7% due to timing differences from the issuance of new units and contribution from the new acquisitions, but raise our FY22F DPU forecast by 2.1%. Consequently, our fair value estimate increases from S$2.07 to S$2.12.
See Mapletree Logistics Trust Share Price; Mapletree Logistics Trust Target Price; Mapletree Logistics Trust Analyst Reports; Mapletree Logistics Trust Dividend History; Mapletree Logistics Trust Announcements; Mapletree Logistics Trust Latest News.

OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2020-12-16

SGX Stock Analyst Report HOLD MAINTAIN HOLD 2.12 UP 1.790