Mapletree Logistics Trust 3QFY22 - UOB Kay Hian 2022-01-31: Switching Focus To Redevelopment Projects

MAPLETREE LOGISTICS TRUST (SGX:M44U)

Mapletree Logistics Trust 3QFY22 - Switching Focus To Redevelopment Projects

Mapletree Logistics Trust’s 3QFY22 results were within our expectations with portfolio occupancy stable at 97.8% and positive rental reversion of +2.5%. It completed three acquisitions worth S$612.9m in 9MFY22 and another 17 properties (1 in Malaysia, 13 in China and 3 in Vietnam) worth S$1,144.8m in 4QFY22.
Mapletree Logistics Trust will pursue acquisitions of logistics properties that have not stabilised and redevelopment projects.

Upgrade Mapletree Logistics Trust to BUY as FY23 distribution yield has hit 5.1% after the recent correction.

Mapletree Logistics Trust (SGX:M44U) reported DPU of S$0.02185 (+5.8% y-o-y) for 3QFY22, which is in line with expectations. 3QFY22 and 3QFY21 DPU included partial distribution of divestment gains of S$1.8m and S$4.7m respectively. Excluding these divestment gains, 3QFY22 DPU would have increased 10% y-o-y.
Growth from existing properties and accretive acquisitions. Gross revenue and net property income (NPI) grew 19.3% and 17.4% y-o-y respectively in 3QFY22 due to higher revenue from existing properties, accretive acquisitions completed in FY21 and FY22, and less rental rebates granted to eligible tenants.
Portfolio occupancy was unchanged at 97.8% with marginally higher occupancy for Hong Kong, Japan and South Korea, offset by lower occupancy in Malaysia. Australia and Vietnam maintained full occupancy of 100%. Mapletree Logistics Trust continues to focus on ensuring tenant retention and working closely with tenants to support their operations.
Mapletree Logistics Trust achieved average rental reversion of 2.5% in 3QFY22 (Vietnam: +4%, Malaysia: +3%, Japan: +3%, South Korea: +3%, Hong Kong: +2.9%, China: +2.8% and Singapore: +1.5%). Retention rate was healthy at 79%.

Mapletree Logistics Trust issued new 3.725% perpetual securities of S$400m and redeemed existing 4.18% perpetual securities of S$250m due for reset. It has also raised S$693m through a private placement and preferential offering debts of S$270m (7% of total borrowings) due in 2HFY22. Its average debt maturity is healthy at 3.5 years.

Given that cap rates for logistics properties are already compressed, management is pursuing acquisitions of logistics properties that have not stabilised (undertake some leasing risks). Mapletree Logistics Trust will embark on redevelopment projects by amalgamating adjacent sites.
Strengthening portfolio through redevelopments. Mapletree Logistics Trust will evaluate the feasibility of two redevelopment projects:
1. 9 Changi South Street 2 (recently acquired) and 15 Changi South Street 2 could be amalgamated and redeveloped into a larger ramp-up logistics property.
2. Redevelopment of 51 Benoi Road into a six-storey ramp-up logistics property with modern specifications.
Value creation through asset recycling. Management intends to step up the pace of asset recycling. There could be opportunities to divest logistics properties at non-prime locations in Singapore, Malaysia, South Korea and Japan at attractive cap rates.

Our FY23F DPU forecast for Mapletree Logistics Trust is relatively based on Dividend Discount Model (cost of equity: 6.0%, terminal growth: 2.0%).
See
Catalysts:
- Accretive acquisitions to rejuvenate and reposition towards modern specifications logistics facilities, domestic consumption and e-commerce.
- Positive contributions from redevelopment projects.

Jonathan KOH CFA UOB Kay Hian Research | https://research.uobkayhian.com/ 2022-01-31

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