Thursday, 24 July 2014

Mapletree Logistics Trust

OCBC on 22 Jul 2014

Mapletree Logistics Trust (MLT) reported 1QFY15 DPU of 1.90 S cents, up 5.6% YoY. This is in line with our expectations. MLT continued to see healthy leasing activity in the quarter, as evidenced by the renewal of 31% of leases due for expiry in FY15, and strong rental reversion of 12%. Going forward, MLT expects the reversions to stay positive, albeit at a slower pace. We are positive on MLT’s recent acquisitions of the Iskandar Malaysia warehouse and Daehwa Logistics Centre at attractive NPI yields in excess of 8%. Both properties are expected to contribute positively to MLT’s DPU in coming quarters. Yesterday, MLT also proposed to acquire a logistics facility in Henan, China from its sponsor for RMB205.6m (~S$41.1m). We understand that the property is expected to generate an initial NPI yield of 8.0% and be accretive at the distribution level. We now incorporate the results and proposed acquisition into our forecasts. Our fair value is raised marginally to S$1.12 from S$1.10. Maintain HOLD on MLT.

1QFY15 results within view
Mapletree Logistics Trust (MLT) reported 1QFY15 NPI of S$69.0m and distributable income of S$46.6m, up 5.6% and 6.0% YoY respectively. The improved performance was mainly due to contribution from its asset enhancements, acquisitions and higher renewal rents mainly in Hong Kong and Singapore. DPU for the quarter was similarly up by 5.6% to 1.90 S cents. This is in line with our expectations, given that the DPU met 24.9% of our full-year forecasts (consensus: 25.7%). 

Operating metrics remained largely robust
As at 30 Jun, MLT’s portfolio occupancy stood at 97.6%. This is a slight decline from the occupancy of 98.3% in the previous quarter, as a result of lower occupancies in Singapore and South Korea portfolios. However, MLT continued to see healthy leasing activity in the quarter, as evidenced by the renewal of 31% of leases due for expiry in FY15, and strong rental reversion of 12%. Going forward, MLT expects the reversions to stay positive, albeit at a slower pace. On a more cautionary note, management guided that there may be pressure on MLT’s occupancy rates amid the upcoming supply in warehouse space and impending conversion of several single-user assets into multi-tenancies, and that property expenses are expected to increase in tandem with the conversion.

Maintain HOLD
We are positive on MLT’s recent acquisitions of the Iskandar Malaysia warehouse and Daehwa Logistics Centre at attractive NPI yields in excess of 8%. Both properties are expected to contribute positively to MLT’s DPU in coming quarters. Yesterday, MLT also proposed to acquire a logistics facility known as Mapletree Zhengzhou Logistics Park in Henan, China from its sponsor for RMB205.6m (~S$41.1m). We understand that the property is expected to generate an initial NPI yield of 8.0% and be accretive at the distribution level. We now incorporate the results and proposed acquisition into our forecasts. Our fair value is raised marginally to S$1.12 from S$1.10. Maintain HOLD on MLT.

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