Monday 24 June 2013

Mapletree Logistics Trust

OCBC on 21 June 2013

Mapletree Logistics Trust (MLT) has entered into a sale and purchase agreement with supply chain management company, Oakline Co. Ltd, for the acquisition of The Box Centre in South Korea. Oakline will lease back the property for a period of six years with built-in rental escalation from second year onwards. At a purchase consideration of KRW28.75b (~S$32.0m), the property is expected to provide an initial NPI yield of 8.4%. Management expects to fund the acquisition fully by debt, which is expected to increase its aggregate leverage marginally from 34.1% as at 31 Mar to 34.6%. This is likely to add ~0.03 S cents to FY14 DPU, based on our projections. We now factor in the acquisition into our forecasts, with the assumption that it will be completed in Jul. However, we reduce our fair value from S$1.34 to S$1.15 on higher cost of equity to reflect a higher risk-free rate, higher beta and reduced market risk appetite for interest-rate sensitive stocks. We maintain HOLD on MLT due to valuation grounds.

Proposed acquisition of The Box Centre
Mapletree Logistics Trust (MLT) has entered into a sale and purchase agreement with supply chain management company, Oakline Co. Ltd, for the acquisition of The Box Centre in South Korea. This will be MLT’s second transaction with Oakline, after the purchase of Yeoju Centre from Oakline in 2008. Oakline will lease back the property for a period of six years with built-in rental escalation from second year onwards. At a purchase consideration of KRW28.75b (~S$32.0m), the property is expected to provide an initial NPI yield of 8.4%. This is likely to add ~0.03 S cents to FY14 DPU, based on our projections.

Details on the property
The Box Centre is a modern warehouse facility comprising a three-storey dry warehouse and an ancillary office block with a total GFA of 27,015sqm. The facility is completed in Mar 2012 and has a floor loading capacity of 15kN/sqm, floor-to-ceiling of 9.8m as well as direct ramp access to all floors and dual-layer walls to reduce dew condensation. Located in Gyeonggi-do, South Korea’s largest logistics cluster, the property is well served by major highways and is in close proximity to the West Icheon Interchange and Deokpyung Interchange. 

Maintain HOLD
Management expects to fund the acquisition fully by debt, which is expected to increase its aggregate leverage marginally from 34.1% as at 31 Mar to 34.6%. In our view, the acquisition is largely in line with MLT’s strategy to focus higher growth markets and strengthen its presence in South Korea’s logistics sector. We now factor in the acquisition into our forecasts, with the assumption that it will be completed in Jul. However, we reduce our fair value from S$1.34 to S$1.15 on higher cost of equity to reflect a higher risk-free rate, higher beta and reduced market risk appetite for interest-rate sensitive stocks. Maintain HOLD on valuation grounds.

1 comment:

  1. Glad to know about the pleasing services. We are already paying rent to one of the well known logistics services Dallas since many months. No complaints regarding their definite facilities and possible helps needed in some time constraint orders. Fast transportation and that too safely are quite helpful for our manufacturing unit.

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