Mapletree Logistics Trust (MLT) announced last Friday evening that it had entered into separate Sale and Purchase agreements to acquire two cold storage warehouses in South Korea for an aggregate purchase price of KRW63.5b (~S$71.3m). We note that both acquisitions are expected to be DPU-accretive, with initial NPI yields of 9.5-9.9%. Funding for the investments is expected to come from the proceeds raised from the recent issuance of its S$350m perpetual securities. In addition, MLT’s aggregate leverage post all acquisitions announced to date is likely to reach ~39%. We now factor in the two acquisitions into our forecasts. This raises our FY13-14F revenue and distributable income by 2.4-3.9%. Our RNAV-based fair value, however, remains at S$1.20. Maintain BUY on MLT.
Acquisition of two quality warehouses in South Korea
Mapletree Logistics Trust (MLT) announced last Friday evening that it had entered into separate Sale and Purchase agreements to acquire two cold storage warehouses in South Korea, namely Jungbu Cold Warehouse (JCW) and Dooil Cold Warehouse (DCW), for an aggregate purchase price of KRW63.5b (~S$71.3m). This marks MLT’s maiden entry into South Korea’s growing cold storage warehouse market. The two assets, which have a total GFA of 38,800 sqm, are each equipped with over 20 cold chambers that offer temperature control ranging from -5°C to -40°C, and are located in Gyeonggi-do, the largest logistics cluster in the country.
Attractive NPI yields and lease terms
We note that each of the properties will be leased back to the respective vendors for a term of 10 years. The lease terms also incorporate a built-in rental escalation of 3% per annum. Altogether, this provides strong and regular cash flows, as well as organic growth to MLT. In addition, both acquisitions are expected to be DPU-accretive, according to management. Specifically, JCW is expected to generate an initial NPI yield of 9.5%, while DCW a yield of 9.9%. These returns are significantly higher than the implied NPI yield of 8.2% for its existing South Korea portfolio of dry warehouses, due to the value-adding building specifications of acquisition assets.
Leverage likely to reach 39% post acquisition
We understand that the acquisitions are expected to complete by Apr 2012. Funding for the investments is expected to come from the proceeds raised from the recent issuance of its S$350m perpetual securities. In addition, MLT’s aggregate leverage post all acquisitions announced to date is likely to reach ~39%. We now factor in the two acquisitions into our forecasts. This raises our FY13-14F revenue and distributable income by 2.4-3.9%. Our RNAV-based fair value, however, remains at S$1.20. Maintain BUY on MLT.
Mapletree Logistics Trust (MLT) announced last Friday evening that it had entered into separate Sale and Purchase agreements to acquire two cold storage warehouses in South Korea, namely Jungbu Cold Warehouse (JCW) and Dooil Cold Warehouse (DCW), for an aggregate purchase price of KRW63.5b (~S$71.3m). This marks MLT’s maiden entry into South Korea’s growing cold storage warehouse market. The two assets, which have a total GFA of 38,800 sqm, are each equipped with over 20 cold chambers that offer temperature control ranging from -5°C to -40°C, and are located in Gyeonggi-do, the largest logistics cluster in the country.
Attractive NPI yields and lease terms
We note that each of the properties will be leased back to the respective vendors for a term of 10 years. The lease terms also incorporate a built-in rental escalation of 3% per annum. Altogether, this provides strong and regular cash flows, as well as organic growth to MLT. In addition, both acquisitions are expected to be DPU-accretive, according to management. Specifically, JCW is expected to generate an initial NPI yield of 9.5%, while DCW a yield of 9.9%. These returns are significantly higher than the implied NPI yield of 8.2% for its existing South Korea portfolio of dry warehouses, due to the value-adding building specifications of acquisition assets.
Leverage likely to reach 39% post acquisition
We understand that the acquisitions are expected to complete by Apr 2012. Funding for the investments is expected to come from the proceeds raised from the recent issuance of its S$350m perpetual securities. In addition, MLT’s aggregate leverage post all acquisitions announced to date is likely to reach ~39%. We now factor in the two acquisitions into our forecasts. This raises our FY13-14F revenue and distributable income by 2.4-3.9%. Our RNAV-based fair value, however, remains at S$1.20. Maintain BUY on MLT.
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