Mapletree Logistics Trust - UOB Kay Hian 2021-01-27: 3PL & E-Commerce Resilient Despite COVID-19 Pandemic

MAPLETREE LOGISTICS TRUST (SGX:M44U)

Mapletree Logistics Trust - 3PL & E-Commerce Resilient Despite COVID-19 Pandemic

Mapletree Logistics Trust demonstrated resiliency with portfolio occupancy relatively stable at 97.1% while maintaining positive rental reversion at 1.6%.
It has completed acquisition of nine properties in China, Malaysia and Vietnam and a remaining 50% stake in 15 properties in China in 3QFY21. More acquisition is on the cards with management evaluating further expansion in South Korea, India and Australia.
Maintain HOLD. Target price: S$2.08. Entry Price: S$1.88.

Mapletree Logistics Trust (SGX:M44U) reported 3QFY21 DPU of 2.065 cents (+1% y-o-y), which is in line with our expectations. See Mapletree Logistics Trust Dividend History.

Gross revenue and net property income (NPI) grew 15.5% and 14.9% y-o-y respectively due to higher revenue from existing properties, contributions from accretive acquisitions completed in FY20 and 9MFY21 and contributions from the recently completed Ouluo Logistics Park Phase 2 redevelopment in Shanghai. Its portfolio of logistics properties was diversified and resilient and most tenants kept their operations stable.

Mapletree Logistics Trust has renewed or replaced 266,483sqm of leases in 3QFY21. It achieved positive rental reversion of 1.6%, which was mainly contributed by leases in Hong Kong (+3%), China (+2.6%), Vietnam (+3.7%), Malaysia (+2.2%) and South Korea (+1.2%).

Portfolio occupancy was relatively stable at 97.1% as of Dec 20. Occupancy rates edged higher in South Korea (+2ppt q-o-q to 96.8%) and China (+1.9ppt q-o-q to 94.5%). Occupancies remained at 100% in Australia, Malaysia and Vietnam.
The newly acquired Higashi Hiroshima Centre in Japan has occupancy of 33%, which dragged occupancy for Japan lower by 4ppt q-o-q to 95.9%. Portfolio occupancy would be higher at 97.4% if we exclude Higashi Hiroshima Centre.

Mapletree Logistics Trust completed the acquisition of nine properties in China, Malaysia and Vietnam and the remaining 50% stake in 15 properties in China in 3QFY21. It has successfully raised S$644m through private placement and preferential offering to finance the acquisitions.

Aggregate leverage has eased 2.7ppt q-o-q to 36.8%. Average cost of debt is low at 2.2%. There is no debt due in 4QFY21. Mapletree Logistics Trust has sufficient committed credit facilities of S$364m to refinance debt of S$145m due in FY22.

Management is concerned about the recent resurgence of COVID-19 infections and renewed lockdown in several countries. Nevertheless, demand for logistics space remains resilient due to growth from 3rd-party logistics (3PL) and e-commerce.
In Singapore, management observed keen interest from providers of last-mile delivery, such as Ninja Van. Management is cautiously optimistic of maintaining positive rental reversion in FY22.

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 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.

The properties are modern logistics spaces built to Grade A specifications that cater to the needs of e-commerce tenants. They 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 expanded into three new cities, namely Qingdao, Ningbo and Guiyang. 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%. The acquisitions are estimated to boost pro forma FY20 DPU by 1.3%.

Mapletree Logistics Trust is evaluating acquisitions of logistics properties in South Korea and India worth about S$400m. It could also jointly bid for a large portfolio of logistics properties in Australia together with its sponsor Mapletree Investments.

We maintain our existing DPU forecast. Maintain HOLD with a target price at S$2.08.
Our valuation is based on DDM (COE: 6.0%, terminal growth: 2.0%).
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.
Entry Price: S$1.88.
Catalyst: Accretive acquisitions to rejuvenate and reposition towards modern specifications logistics tic consumption and e-commerce.

Jonathan KOH CFA UOB Kay Hian Research | https://research.uobkayhian.com/ 2021-01-27

SGX Stock Analyst Report HOLD MAINTAIN HOLD 2.080 SAME 2.080