Mapletree Logistics Trust

Maybank Kim Eng Research, Jan 21

WITH gearing at 33.9 per cent, Mapletree Logistics Trust (MLT) has a debt headroom of S$450 million before hitting the 40 per cent leverage ratio. But it has not had much luck with acquiring assets from its sponsor, Mapletree Investments Pte Ltd (MIPL), in the past year despite MIPL having 13 sizeable logistics developments in Asia.

The weakening yen remains a concern because Japan is home to about 25 per cent of MLT's assets and accounted for 21 per cent of its revenue in Q3 FY2014. Moreover, its forex hedging has been concentrated mainly in FY2014 and management did not disclose the swap rates for future years.

MLT said it has converted two single-user assets (SUAs) into multi-tenanted buildings (MTBs) in FY2014, with another two to be converted by March 2014. It plans to progressively shift its SUA-to-MTB ratio from 59 per cent:41 per cent currently to 50 per cent:50 per cent. This would shorten its weighted average lease expiry periods in the coming years (Q3 FY2014: 4.8 years), as MTBs have shorter three-year leases against at least five years for SUAs and are better able to capture the upside of a growing rental market.

We forecast DPU to grow at an unexciting one per cent compounded annual growth rate over FY2014 to FY2016. MLT said active lease and asset management will remain a key management priority, especially in Singapore in view of the upcoming supply of 3.9 million sq ft of warehouse space in 2014. In terms of acquisition, we are still waiting to see if MLT will target sponsor injections such as Mapletree Shah Alam Logistics Park in Malaysia and Mapletree Zhengzhou International Logistics Park in China.

We cut our FY2014-16 DPU forecasts by 0.3-0.5 per cent in anticipation of lower growth prospects and higher borrowing costs. The stock has corrected by 6 per cent in the previous quarter. Maintain "sell" with a lower dividend discount model-derived target price of S$0.98.

SELL