Wednesday, 23 April 2014

Mapletree Logistics Trust

Kim Eng on 23 Apr 2014

  • FY3/14 results in line with our and market expectations.
  • Japan portfolio still a drag on top line; aggregate revenue and NPI for the past four quarters fell 17% YoY.
  • FY3/14-17E DPU CAGR to be an unexciting 0.3% without concrete growth catalysts. Maintain SELL with TP of SGD1.00.
FY3/14 results largely in line
MLT reported a mere 0.9% YoY growth in FY3/14 revenue to SGD310.7m, aided by 17% positive rental reversion for leases secured during the year, but offset by a weaker yen and lower translated revenue from the Japan portfolio. It expects rental reversions to moderate going forward. Full-year DPU rose 7.1% YoY to 7.35 cts, with the SGD2.48m gain from the divestment of 30 Woodlands Loop contributing 0.1 cts. MLT has about 18% of leases (in terms of NLA) due for renewal this year. The all-in-financing cost for 4QFY3/14 averaged 1.9% (4QFY3/13: 2.4%) with an average term of debt of 3.6 years. According to MLT’s interest rate sensitivity analysis, its DPU would decline ~0.5%, or 0.01 cts per quarter, for every 25bps increase in interest rate.

Unexciting DPU growth
We forecast DPU to grow at an unexciting CAGR of 0.3% over FY3/14-17E. Management said it will proactively seek to divest low-yielding assets to recycle capital. As for sponsor injections, the Mapletree Shah Alam Logistics Park in Malaysia is unlikely to be acquired this year due to ongoing defect rectification at the property. However, MLT cited opportunities in Mapletree Yangshan and Mapletree Zhengzhou in China. It has also signed a third-party MOU for a hi-specs warehouse in South-Korea and a purchase agreement may be forthcoming. As these prospective acquisitions have yet to materialise, we adjust our FY3/14-16E DPU forecasts by 1.2% on lower borrowing costs and better reversion rates. Maintain SELL with a DDM-derived TP of SGD1.00 (previously SGD0.98), given high valuations (1.2x P/BV) and lack of concrete growth catalysts.

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