Mapletree Logistics Trust

OCBC on 22 Jul 2015

Mapletree Logistics Trust (MLT) started FY16 on a muted note, recording a 2.6% YoY dip in its 1Q DPU to 1.85 S cents, but this was within our expectations. MLT continued to be impacted by cost pressures associated with ongoing conversions of its single-user assets (SUAs) to multi-tenanted buildings. On a positive note, portfolio occupancy was relatively stable at 96.6%, while positive rental reversions of 5% were achieved. We ease our FY16-FY17F NPI margin assumptions by 0.4-0.7 ppt on account of cost pressures, but raise our DPU forecasts for FY16 and FY17 by 1.5% and 3.6%, respectively, as we input MLT’s recent acquisitions in our model. However, we also raise our cost of equity assumption slightly from 8.4% to 8.6% given the challenging operating landscape faced by MLT and downside risks from the 17 SUA leases due to expire in FY16. This causes our fair value estimate to fall marginally from S$1.14 to S$1.13. Maintain HOLD.

1QFY16 results within expectations
Mapletree Logistics Trust (MLT) started FY16 on a muted note, recording a 2.6% YoY dip in its 1Q DPU to 1.85 S cents. This was the second consecutive quarter of YoY DPU fall. Gross revenue rose 5.0% to S$85.1m due largely to full contribution from six properties acquired during FY15. 1QFY16 DPU and gross revenue formed 24.5% and 24.2% of our full-year forecasts, respectively, within our expectations. MLT continued to be impacted by cost pressures associated with ongoing conversions of its single-user assets (SUAs) to multi-tenanted buildings (MTBs). Portfolio occupancy was relatively stable at 96.6%, while positive rental reversions of 5% were achieved.

Looking overseas for growth opportunities
Given the headwinds facing MLT in Singapore, management has actively sought inorganic growth opportunities overseas. It recently completed one acquisition each in South Korea (Jun) and Vietnam (Jul) at initial NPI yields of 8% and 10%, respectively. Another proposed premium freehold cold store warehouse acquisition in Sydney, Australia, is currently pending completion at a purchase consideration of A$253m (~S$261.5m), or initial NPI yield of 5.6%. In our view, this acquisition does not appear cheap, but would diversify MLT’s income streams and add stability given the long WALE of 19 years with built in annual escalations. MLT’s gearing ratio will increase to 38.1% by end FY16, based on our estimates. We believe this leaves little debt headroom ahead for more significant acquisitions, and MLT would likely have to utilise equity financing for future large scale acquisitions.

Maintain HOLD
We ease our FY16-FY17F NPI margin assumptions by 0.4-0.7 ppt on account of cost pressures, but raise our DPU forecasts for FY16 and FY17 by 1.5% and 3.6%, respectively, as we input MLT’s recent acquisitions in our model. However, we also raise our cost of equity assumption slightly from 8.4% to 8.6% given the challenging operating landscape faced by MLT and downside risks from the 17 SUA leases due to expire in FY16. This causes our fair value estimate to fall marginally from S$1.14 to S$1.13. Maintain HOLD.

Mapletree Logistics Trust

OCBC on 21 Apr 2015

Mapletree Logistics Trust (MLT) reported a soft set of 4QFY15 results, as DPU slipped 2.1% YoY to 1.85 S cents despite a 5.7% growth in revenue to S$84.7m. This was within our expectations. MLT’s operational performance was affected by downtime caused by the conversion of several of its Singapore properties from single-user assets to multi-tenanted buildings during FY15. This had a negative impact on its occupancy rate and net property income margin. Nevertheless, on a positive note, only its Singapore assets registered a decline in occupancy rates for FY15, while overall average rental reversions of 8.0% were achieved. Management has also hedged 80% of its total debt and estimated income stream for FY16. We trim our FY16 and FY17 DPU forecasts by 2%, but as we roll forward our valuations, our DDM-derived fair value estimate inches up slightly from S$1.12 to S$1.14. Maintain HOLD, given the lack of near-term catalysts.

4QFY15 results within expectations
Mapletree Logistics Trust (MLT) reported a soft set of 4QFY15 results, as DPU slipped 2.1% YoY to 1.85 S cents despite a 5.7% growth in revenue to S$84.7m. This was attributed largely to higher property expenses (+21.3% YoY) and borrowing costs (+22.6%). For FY15, gross revenue rose 6.2% YoY to S$330.1m while DPU increased slightly by 2.0% to 7.5 S cents. This was within our expectations as gross revenue and DPU formed 99.9% and 98.6% of our full-year forecasts, respectively.

Operations impacted by conversion of leases in Singapore
MLT’s operational performance was affected by downtime at several of its Singapore properties which underwent conversion from single-user assets (SUAs) to multi-tenanted buildings (MTBs) during FY15. This had a negative impact on its occupancy rate and net property income (NPI) margin, which eased 1.6 ppt and 2.1 ppt to 96.7% and 84%, respectively. Nevertheless, on a positive note, only its Singapore assets registered a decline in occupancy rates for FY15, while overall average rental reversions of 8.0% were achieved. Management has also mitigated its financial risks, as it has hedged 80% of its total debt into fixed rates. 80% of its income stream for FY16 have also been hedged into or derived in SGD.

Reiterate HOLD
Looking ahead, ~24% of MLT’s leases (by NLA) are expiring in FY16, of which 10% are leases for SUAs and 14% are leases for MTBs. As most of the SUAs in Singapore are expected to be converted to MTBs, we continue to see some pressure on MLT’s occupancy rate and margins. We trim our FY16 and FY17 DPU forecasts by 2%, but as we roll forward our valuations, our DDM-derived fair value estimate inches up slightly from S$1.12 to S$1.14. Maintain HOLD, given the lack of near-term catalysts. The stock is, however, trading at a decent FY16F distribution yield of 6.1%.

Mapletree Logistics Trust

UOBKayhian on 21 Jan 2015

FY15F PE (x): 16.6
FY16F PE (x): 17.0
Results in line with expectations. Mapletree Logistics Trust (MLT) reported 3QFY15
DPU of 1.87 S cents (+3.3% yoy, -1.1% qoq). 9MFY15 DPU is in line with our
expectations, accounting for 74.3% of our full-year DPU estimate of 7.60 S cents. Rent
reversions remained at a positive 9% in 3QFY15.
Rental uplift from MTBs set to remain muted in the near term. While management
expects increased rental uplift post conversion, low occupancy rates during transition
will impact earnings. Management has highlighted that occupancy during MTB
conversion hovers at around 50%.
Maintain HOLD with an unchanged target of S$1.32, based on DDM (required rate of
return: 6.9%, terminal growth: 1.5%). Entry price is at S$1.15.

Mapletree Logistics Trust

OCBC on 21 Jan 2015

Mapletree Logistics Trust (MLT) reported a mild 1.6% YoY growth in its 3QFY15 DPU to 1.87 S cents on the back of a 6.2% increase in its gross revenue to S$82.9m. Results were in-line with our expectations. Looking ahead, we believe the outlook remains challenging, especially in Singapore. This is underpinned by the continued conversion of its single-user assets to multi-tenanted buildings, which would result in downtime and pressure on margins and occupancy. Management is seeking to mitigate this by exploring acquisition and divestment opportunities, with net gains from divestments to be distributed back to unitholders. Maintain HOLD on MLT, with an unchanged fair value estimate of S$1.12. We believe valuations are rich, with the stock trading at FY15F P/B of 1.3x.

3QFY15 results within expectations
Mapletree Logistics Trust (MLT) reported a mild 1.6% YoY growth in its 3QFY15 DPU to 1.87 S cents on the back of a 6.2% increase in its gross revenue to S$82.9m. Topline growth was driven by contributions from six acquisitions in China, Singapore, Malaysia and Korea, the Mapletree Benoi Logistics Hub redevelopment project, and higher revenue from existing assets in Singapore, Malaysia and Hong Kong. These were partially offset by lower occupancy at several of its newly converted multi-tenanted buildings (MTBs) in Singapore. For 9MFY15, revenue grew 6.4% to S$245.4m and DPU rose 3.5% to 5.65 S cents. The former and latter constituted 74.6% and 74.1% of our FY15 forecasts, respectively. This was within our expectations. 

Some pressure on occupancy rates
MLT’s portfolio occupancy eased 0.3 ppt QoQ to 96.9% (as at end 3QFY15), its fifth consecutive quarter of sequential decline. The drag came largely from its Singapore assets, which experienced downtime due to the conversion of single-user assets (SUAs) to MTBs. Management would focus on tenant retention during this challenging period. As at 31 Dec 2014, MLT’s leverage ratio stood at 34.7%, while ~76% of its total debt have been hedged or are on a fixed rate basis.

Headwinds to persist in the near-term
MLT managed to achieve positive average rental reversions of 9% for leases renewed in 3QFY15, but we believe the outlook remains challenging, especially in Singapore. We see headwinds ahead as 16 of its SUAs have leases which are expiring in FY16 (9.5% of NLA and 9%-10% of gross revenue). Approximately half of these leases are expected to be converted into MTBs, which would result in further downtime and pressure on margins and occupancy rates. Management is seeking to mitigate this by exploring acquisition and divestment opportunities, with net gains from divestments to be distributed back to unitholders. Maintain HOLD on MLT, with an unchanged fair value estimate of S$1.12. We believe valuations are rich, with the stock trading at FY15F P/B of 1.3x, following a 4.2% appreciation in its share price YTD.

Mapletree Logistics Trust

OCBC on 23 Oct 2014

Mapletree Logistics Trust (MLT) reported a 3.3% YoY increase in its 2QFY15 DPU to 1.88 S cents on the back of a 5.8% growth in its gross revenue to S$81.5m. Results were in-line with expectations. MLT has concluded four accretive acquisitions in Malaysia, South Korea and China worth ~S$149m YTD, with NPI yields ranging from 7.5%-8.4%. Although MLT managed to achieve positive average rental reversions of 9% for leases renewed in 2QFY15, the outlook remains muted. While we still expect rental reversions to remain positive, the pace of growth would likely moderate. After updating our valuation model for our latest assumptions, our DDM-derived fair value remains unchanged at S$1.12 and we maintain our HOLD rating.

2QFY15 results within expectations
Mapletree Logistics Trust (MLT) reported a 3.3% YoY increase in its 2QFY15 DPU to 1.88 S cents on the back of a 5.8% growth in its gross revenue to S$81.5m. This was driven by contributions from its redevelopment project Mapletree Benoi Logistics Hub, higher revenue from existing assets in Singapore and Hong Kong, but partially offset by lower occupancy at several of its newly converted multi-tenanted buildings in Singapore. Overall portfolio occupancy rates slipped 0.4 ppt to 97.2%, its fourth consecutive quarter of QoQ decline. For 1HFY15, revenue and DPU grew 6.6% and 4.4% to S$162.5m and 3.78 S cents, respectively, both of which formed 49.4% of our FY15 forecasts. We view this set of results as in-line with our expectations. 

Four accretive acquisitions concluded YTD
MLT has concluded four accretive acquisitions in Malaysia, South Korea and China worth ~S$149m YTD (two were completed post 2QFY15 in China on 8 Oct), with NPI yields ranging from 7.5%-8.4%. This is attractive compared to its FY14 portfolio NPI yield of 6.3%, in our view. The four assets are funded wholly by debt, which will cause its aggregate leverage ratio to increase to 34.6%.

Maintain HOLD on muted outlook
Although MLT managed to achieve positive average rental reversions of 9% for leases renewed in 2QFY15, the outlook remains muted. This is attributed to the sluggish macroeconomic environment, tighter regulatory landscape and higher expenses from the continued conversion of its single-tenanted assets to multi-tenanted buildings in Singapore. Nevertheless, we still expect rental reversions to remain positive, although the pace of growth would likely moderate. After updating our valuation model for our latest assumptions, our DDM-derived fair value remains unchanged at S$1.12. Maintain HOLD. In our view, valuations appear rich, with the stock trading at 1.23x FY15F P/B, which is approximately 0.5 standard deviation above its 10-year average forward P/B ratio of 1.07x.

Mapletree Logistics Trust

Kim Eng on 22 July 2014

• 1QFY3/15 results in line with our and market expectations.
• Acquiring another property from sponsor for SGD41.1m with initial NPI yield of 8%. More could be on the cards.
• FY3/15E-17E DPU forecasts raised by up to 1.6%; reiterate HOLD with a higher TP of SGD1.18.

In-line 1QFY3/15 results
MLT posted a 5.6% YoY rise in 1QFY3/15 DPU, meeting 26% of our full-year estimate, aided by contribution from Mapletree Benoi Logistics Hub and a 12% YoY positive rental reversion for leases
secured during last quarter. MLT has about 18% of leases, in terms of NLA, due for renewal in FY3/15. The all-in-financing cost for 1QFY3/15 averaged 2.0% (4QFY3/14: 1.9%) with an average term of debt of 3.4 years. According to MLT’s interest rate sensitivity analysis, its DPU would decline by ~0.5%, or 0.009 SGD cts per quarter, for every 25bps increase in interest rates.

Mapletree Zhenzhou Logistics Park acquisition
MLT has signed a MoU with its sponsor, Mapletree Investments Pte Ltd, to acquire Mapletree Zhenzhou Logistics Park in Henan, China for SGD41.1m. The acquisition, which will deliver an initial 8.0% NPI yield, will raise its gearing to 34.5% (33.4% at end-June). We expect this to complete by 1 Aug and to be fully debt funded. The SGD107m redevelopment of 5B Toh Guan Road East will add 40,000 sq m of space when completed in 1QFY3/17. We raise our FY3/15E-17E DPU forecasts by 1.2-1.6% to factor in these initiatives and better reversion rates for its overall portfolio.
Reiterate HOLD with a higher DDM-derived TP of SGD1.18 (cost of equity = 7.1%; Tg = 1%) from SGD1.15. Catalyst: Further asset injections by the sponsor, which has another 14 sizeable logistics
developments in Asia, representing more than half of MLT’s total portfolio NLA.

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.

Mapletree Logistics Trust

OCBC on 26 June 2014

Mapletree Logistics Trust (MLT) recently proposed to acquire Daehwa Logistics Centre from vendor Daehwa Logistics Co Ltd. At a purchase consideration of KRW25.5b (~S$31.2m), the asset is expected to generate an initial NPI yield of 8.3%. Based on our projections, the new addition could add an annualized 0.05 S cents to MLT’s DPU. Looking ahead, we believe MLT may turn to the China assets from its sponsor’s pipeline for further growth. However, pending any new development, we only factor in the acquisition of Daehwa Logistics Centre for now. Our fair value remains unchanged at S$1.10. Maintain HOLD on valuation grounds.

Expanding footprint in South Korea
Mapletree Logistics Trust (MLT) recently proposed to acquire Daehwa Logistics Centre from vendor Daehwa Logistics Co Ltd. This represents MLT’s investment of the ninth property in South Korea. At a purchase consideration of KRW25.5b (~S$31.2m), the asset is expected to generate an initial NPI yield of 8.3%. MLT intends to fund the acquisition by debt, and expects the transaction to be completed by Jul 2014. Based on our projections, the new addition could add an annualized 0.05 S cents to MLT’s DPU. On the other hand, MLT’s gearing is likely to increase marginally from 33.3% as at 31 Mar to 33.8%.

Details on the new property
Daehwa Logistics Centre is a three-storey Grade A dry warehouse with a GFA of 25,600 sqm located in the prime logistics hub in Seoul. It was completed in Dec 2013, and boasts modern specifications such as a floor-to-ceiling height of 10m, floor loading capacity of 2.7 ton/sqm and direct ramp access to all three floors. At present, the warehouse facility is fully occupied by three quality tenants, namely eBay (one of world’s largest e-commerce companies), Acushnet (global golf equipment company) and vendor Daehwa (fast growing local logistics operator). The leases have a weighted average lease to expiry of 3.5 years with built-in annual rental escalations for 70% of the leased area.

Maintain HOLD
We note that the acquisition is consistent with management’s guidance in Apr that it was performing the due diligence for a potential purchase of a Korea-based property. It is also in line with MLT’s strategy to rebalance its portfolio towards South Korea and other higher growth markets. Looking ahead, we believe MLT may turn to the China assets from its sponsor’s pipeline for further growth. However, pending any new development, we only factor in the acquisition of Daehwa Logistics Centre for now. Our fair value remains unchanged at S$1.10. Maintain HOLD on valuation grounds.

Mapletree Logistic Trust

Kim Eng on 27 May 2014

• MLT acquires Daehwa Logistics Centre, its ninth property in South Korea, for SGD31.2m which is to be fully debt funded.
• At an initial NPI yield of 8.3%, it is a DPU-accretive acquisition.
• A positive move but too small to ‘move the needle’ for MLT. Reiterate SELL with a higher TP of SGD1.01.

What’s New
MLT announced last evening that it has entered into a sale and purchase agreement for the acquisition of Daehwa Logistics Centre in South Korea for KRW25.5b (SGD31.2m). We believe this asset was highlighted by management during the FY3/14 briefing on which MLT had previously signed an MOU. The new property is fully occupied by three quality tenants: eBay, Acushnet and Daehwa. The leases have a weighted average lease term to expiry of 3.5 years with built-in annual rental escalations for 70% of the leased area. The acquisition will be fully debt funded with completion expected by July. MLT’s aggregate leverage ratio is expected to increase marginally to 33.8% from 33.3% as of 31 Mar 2014.

What’s Our View

The property’s initial NPI yield of 8.3% compares favourably to MLT’s cost of borrowing of 1.9% and overall portfolio NPI yield of 6.5%. While it is a DPU-accretive acquisition, it would only raise FY3/15E-FY3/17E EPS by up to 0.8%. Post transaction, revenue contribution from South Korea will increase from 8.7% to 9.4%. Nonetheless, the size of the acquisition is too small to ‘move the needle’ for MLT and we look forward to more sponsor injections and third-party acquisitions in FY3/15E. We remain downbeat on industrial warehouse properties, as this segment is the most at risk of a sharp physical price correction. Maintain SELL on MLT with a slightly higher TP of SGD1.01 (previously SGD1.00) after factoring in this acquisition.

Mapletree Logistics Trust

OCBC on 23 Apr 2014

Mapletree Logistics Trust (MLT) reported 4QFY14 DPU of 1.89 S cents, up 9.2% YoY. This is in line with both our and consensus expectations. Operationally, MLT has been exhibiting resilience, as evidenced by its stable portfolio occupancy and healthy rental reversion achieved during the year. Going forward, management expects the demand for logistics facilities in its markets to remain robust, while rental reversion to stay positive. MLT also said that it will focus on driving organic and inorganic growth. We believe MLT may carry out capital recycling to partially fund the potential investments, given that it has identified a few lower yielding assets for divestment. We lift our fair value from S$1.06 to S$1.10 as we roll our valuation to FY15. However, as the stock appears fairly priced, we maintain our HOLD rating.

4QFY14 results within expectations
Mapletree Logistics Trust (MLT) reported 4QFY14 gross revenue of S$80.1m and NPI of S$68.3m, up 5.7% and 4.3% YoY, respectively. The positive showing was due mainly to new income stream from Mapletree Benoi Logistics Hub, contribution from The Box Centre, and robust rental reversions from Hong Kong and Singapore. We note that NPI growth would be even stronger at 5.4%, if not for a weaker JPY. Nevertheless, the forex impact on distribution was mitigated by currency hedges. Together with lower finance costs and a distribution of S$0.6m divestment gain, DPU came in at 1.89 S cents, up 9.2% YoY. As a result, FY14 DPU totalled 7.35 S cents (+7.1%). This is in line with our DPU forecast of 7.26 S cents (consensus: 7.2 S cents).

Operational performance staying resilient
Operationally, MLT has been exhibiting resilience, as evidenced by its stable portfolio occupancy of 98.3% (3Q: 98.4%) and healthy rental reversion of 17% achieved during the year. For FY15, we note that ~18.0% of MLT’s leases will be expiring, of which 14.0% has been renewed ahead. Going forward, management expects the demand for logistics facilities in its markets to remain robust. In addition, rental reversion is expected to stay positive, albeit at a moderate pace.

Maintain HOLD on valuation grounds
MLT also reiterated its focus on driving organic growth through proactive leasing efforts and asset enhancements, such as the redevelopment of 5B Toh Guan Road East. However, unlike previous quarter, management now raises the possibility of growth through acquisition. Specifically, MLT highlighted that it has signed an MOU for a Korea-based property from a third-party vendor, and is currently performing its due diligence for potential purchase. From its sponsor’s pipeline, MLT is eyeing two China-based assets. We believe MLT may carry out capital recycling to partially fund the potential investments, given that it has identified a few lower yielding assets for divestment. We lift our fair value from S$1.06 to S$1.10 as we roll our valuation to FY15. However, as the stock appears fairly priced, we maintain our HOLD rating.

Mapletree Logistics Trust

CIMB Research, April 22

MAPLETREE Logistics Trust (MLT) reported its FY2014 results, with revenue coming in at $80.1 million (+5.7 per cent y-o-y) and DPU at 1.87 cents (+7.8 per cent y-o-y).

The growth in revenue was dampened in part as a result of the weaker yen.

Excluding forex losses, gross revenue would have increased to $81.0 million (+6.9 per cent y-o-y) due to new attribution from the newly completed AEIs in Singapore and Japan, and contribution from the Box Centre in Korea that was acquired during the year (July 2013).

Lower borrowing costs and the partial distribution of the net gain from the divestment of 30 Woodlands Loop boosted its earnings, taking the total DPU to 1.89 cents (+9.2 per cent y-o-y).

Rental reversion in FY2013/2014 remained healthy at 17 per cent, mainly from Hong Kong and Singapore properties. Looking ahead, with positive rental reversion expected to moderate, together with only 18 per cent of net lettable area (NLA) (of which 14 per cent has been renewed ahead of expiry) to be renewed in FY2014/2015, we believe MLT will rely more on acquisition and redevelopment for growth.

In FY2014/2015, MLT is likely to benefit from the completed redevelopment project at Mapletree Benoi Logistics Hub (100 per cent pre-committed), and the recently announced $34.3 million acquisition in Iskandar.

With the current leverage ratio of 33.3 per cent, MLT continues to have the financial ability to capitalise on further inorganic opportunities.

Although it is well poised to grow in FY2014/2015, we believe that the positivity of MLT may be dampened by the continual weakness in the yen. We maintain our "hold" rating with a slightly higher DDM-based target price of S$1.13 as we wait for more impactful acquisitions and redevelopments.

HOLD

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.

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

Mapletree Logistics Trust

UOBKayhian on 22 Jan 2014

FY14F DPU Yld (%): 6.8
FY15F DPU Yld (%): 7.2

Results in line with expectations. Mapletree Logistics Trust (MLT) reported a 3QFY14
distributable income of S$45.0m (+7.5% yoy, +1.1% qoq) or a DPU of 1.84 S cents
(+7.0% yoy, +1.1% qoq). Excluding divestment gains of 0.02 S cents, adjusted DPU is
1.82 S cents (+5.5% yoy). 9MFY14 DPU of 5.46 S cents is in line with our expectations,
accounting for 76.9% of our full-year DPU estimate of 7.10 S cents.

Maintain BUY and target of S$1.29, based on DDM (required rate of return: 6.9%,
terminal growth: 1.5%).

Mapletree Logistics Trust

OCBC on 21 Jan 2014

Mapletree Logistics Trust (MLT) reported 3QFY14 DPU of 1.84 S cents, up 7.0% YoY. This brings the 9MFY14 DPU to 5.46 S cents, meeting 75.2%/76.9% of our/consensus full-year projections. Going forward, management reiterated that active lease and asset management will be a key priority in light of the supply of warehouse space in 2014 and impending conversion of more single-user assets into multi-tenancies (which may result in occupancy dip). MLT also confirmed our view that competition for acquisition of logistic assets is becoming increasingly intense. Nevertheless, given that MLT’s recent initiatives are like to contribute positively to MLT’s income, we believe MLT’s performance will remain robust in FY15. Maintain HOLD with unchanged fair value of S$1.06.

3QFY14 results met expectations
Mapletree Logistics Trust (MLT) reported a consistent set of 3QFY14 results last evening. NPI saw a marginal drop of 0.2% YoY to S$67.4m, dragged down by weaker JPY. Excluding the forex impact, NPI would have grown by 3.6% on the back of higher renewal rents in Singapore and Hong Kong, and new income streams from Mapletree Wuxi Logistics Park and The Box Centre. Impact of depreciating JPY on bottomline, however, was mitigated as contributions from Japan are substantially hedged. Together with a 22.9% decrease in borrowing costs and divestment gain of S$0.6m, amount distributable to unitholders rose by 7.7% to S$45.0m. As such, DPU similarly grew by 7.0% to 1.84 S cents. This brings the 9MFY14 DPU to 5.46 S cents, meeting 75.2%/76.9% of our/consensus full-year projections.

Portfolio metrics remained sturdy
Portfolio occupancy stood at 98.4%, representing a slight QoQ drop of 0.3ppt. This, we note, was due to the conversion of two single-user assets into multi-tenanted buildings in Singapore. That aside, operational performance remained sturdy, as evidenced by robust rental reversions of 23% and healthy leasing activities (84% of FY14 leases renewed to-date vs. 62% a quarter ago) achieved at its portfolio. Management reiterated that active lease and asset management will be a key priority going forward in light of the supply of warehouse space in 2014 and impending conversion of more single-user assets into multi-tenancies (which may result in occupancy dip).

Maintain HOLD
MLT also confirmed our view that competition for acquisition of logistic assets is becoming increasingly intense. Nevertheless, given that MLT’s recent initiatives, such as 1) completion of redevelopment of Mapletree Benoi Logistics Hub and Phase 1 solar panel installation at its Japan assets, 2) upcoming redevelopment of 5B Toh Guan Road East and Phase 2 solar panel installation, and 3) proposed acquisition of warehouse in Iskandar Malaysia, are like to contribute positively to MLT’s income, we believe MLT’s performance will remain robust in FY15. Maintain HOLD with unchanged fair value of S$1.06.

Mapletree Logistics Trust

OCBC on 15 Jan 2013

Mapletree Logistics Trust (MLT) proposed to acquire an industrial warehouse in Iskandar Malaysia last Friday. Based on the purchase price of MYR88.5m (~S$34.3m), the initial NPI yield of the property is expected to be ~8.4%. This is higher than the implied yield of 7.1% for MLT’s existing Malaysia portfolio. We estimate the income from the asset will add 0.1 S cents to MLT’s DPU on an annualised basis, thus making the deal DPU-accretive. Management intends to fund the acquisition wholly by debt, which should see its aggregate leverage increase marginally by 0.5ppt to 34.9% upon completion. However, we do not expect any near-term impact to its DPU and gearing given that the transaction is projected to complete by 3QFY15 (Dec 2014). Nevertheless, as we switch our valuation method from RNAV to DDM due to uncertainty in cap rate movement, our fair value on MLT drops from S$1.11 to S$1.06. Maintain HOLD.

Acquisition of warehouse in Iskandar Malaysia
Mapletree Logistics Trust (MLT) proposed to acquire an industrial warehouse in Iskandar Malaysia last Friday. The property was put up on sale via a closed tender exercise by Mapletree Industrial Fund, a closed-end fund managed by MLT’s sponsor. Hence, the acquisition is considered an interested party transaction. We note that the purchase price of MYR88.5m (~S$34.3m) is below the valuations of MYR91.0m-MYR95.4m by the two independent valuers. Management guided that the property is likely to generate an initial NPI yield of ~8.4%, higher than the implied yield of 7.1% for MLT’s existing Malaysia portfolio. We estimate the income from the asset will add 0.1 S cents to MLT’s DPU on an annualised basis, thus making the deal DPU-accretive.

Details on warehouse
The warehouse, which is located within Johor Technology Park in Zone E of Iskandar Malaysia, will mark MLT’s fourth asset in this special economic region. The property comprises seven blocks of single and double-storey industrial warehouses and one office block, and has a GFA of ~63,750 sqm. In addition, the asset is designed with good building specifications and is easily accessible via the North-South Highway and Senai Highway. At present, the property is leased to a subsidiary of LCTH Corporation Bhd on a 12-year triple net lease expiring in 2020, which is in turn sub-leased to a subsidiary of Nasdaq-listed Flextronics. Due to the long lease in place, the weighted average lease to expiry post acquisition is expected to improve to 5.0 years from 4.9 years, thus enhancing MLT’s earnings visibility. 

Maintain HOLD
Management intends to fund the acquisition wholly by debt, which should see its aggregate leverage increase marginally by 0.5ppt to 34.9% upon completion. However, we do not expect any near-term impact to its DPU and gearing given that the transaction is projected to complete by 3QFY15 (Dec 2014). Nevertheless, as we switch our valuation method from RNAV to DDM due to uncertainty in cap rate movement, our fair value on MLT drops from S$1.11 to S$1.06. Maintain HOLD.

Mapletree Logistics Trust

OCBC on 21 Oct 2013

Mapletree Logistics Trust (MLT) reported 2QFY14 DPU of 1.82 S cents, representing a 6.4% growth YoY. We deem the results to be in line with our expectations, as 1HFY14 DPU of 3.62 S cents have met 49.9% of our full-year DPU forecasts. While the global economic outlook remains murky, leasing demand at MLT’s logistics facilities has held firm. Going forward, MLT reiterated that it will continue to optimize the portfolio yield through repositioning, enhancement and redevelopment opportunities. We understand that the redevelopment of Mapletree Benoi Logistics is on track for completion in 3QFY14, and that MLT will be embarking on its next redevelopment project at 5B Toh Guan Road in early FY15. We make minor adjustments to our forecasts but lower our fair value marginally to S$1.11 (S$1.15 previously) on higher risk-free rate assumptions. Maintain HOLD.

2QFY14 results within expectations
Mapletree Logistics Trust (MLT) reported a 1.3% YoY drop in 2QFY14 NPI to S$66.6m, as its Japan portfolio saw lower translated income on weaker JPY. Stripping out the forex impact, NPI would have increased by 3.4% due to positive rental reversions and contributions from its past three acquisitions. Total amount distributable to unitholders grew at a faster pace of 7.5% to S$44.5m, as MLT substantially hedged its income streams from Japan, benefitted from lower financing costs, and distributed S$0.6m (0.025 S cents/unit) in divestment gains from 30 Woodlands Loop. For the quarter, DPU came in at 1.82 S cents, representing a 6.4% growth YoY. We deem the results to be in line with our expectations, as 1HFY14 DPU of 3.62 S cents have met 49.9% of our full-year DPU forecasts (consensus: 51.0%).

Firm leasing demand at MLT’s portfolio
While the global economic outlook remains murky, leasing demand at MLT’s logistics facilities has held firm. Starting with 15% of its leases due for expiry in FY14, MLT has managed to renew/replace ~62% of the leases. Portfolio occupancy also improved 50bps QoQ to 98.7%, boosted by higher take-up rates at MLT’s China, Hong Kong and Korea portfolios. More importantly, positive rental reversion of 24% was achieved, higher than the 17% growth seen in previous quarter. This is somewhat more positive than management’s previous guidance for a moderating rate going forward.

Continued focus on yield optimization
MLT reiterated that it will continue to optimize the portfolio yield through repositioning, enhancement and redevelopment opportunities. We understand the redevelopment of Mapletree Benoi Logistics is on track for completion in 3QFY14, while pre-commitment is unchanged at 94%. Following this, MLT will be embarking on its next redevelopment project at 5B Toh Guan Road in early FY15, which will see the site transform from a 3-storey warehouse to a 6-storey modern ramp-up facility (GFA up 2.7x). We make minor adjustments to our forecasts but lower our fair value marginally to S$1.11 (S$1.15 previously) on higher risk-free rate assumptions. Maintain HOLD.

Mapletree Logistics Trust

OCBC on 22 Jul 2013

Mapletree Logistics Trust (MLT) reported 1QFY14 DPU of 1.80 S cents, up 5.9% YoY. Stripping out divestment gain from 30 Woodlands Loop, DPU would be up 4.7%. The results were in line with expectations, as 1Q DPU have met 24.8%/25.4% of our/consensus full-year DPU projections. Overall occupancy stood at 98.2%, largely stable from 98.5% seen in previous quarter. In addition, positive rental reversion of 17% was achieved. This is higher than prior quarter’s growth of 14%, although MLT maintains its view that the rate is set to moderate going forward. MLT also updated that its redevelopment project at 21 Benoi Sector in Singapore is on track for completion in 3QFY14, and that the property is currently 94% pre-leased. In the coming quarter, The Box Centre in Korea (acquired in Jul at NPI yield of 8.4%) will start contributing to MLT’s topline. We are keeping our forecasts intact for now as the results were within expectations. Maintain HOLD with an unchanged fair value of S$1.15 on MLT.

1QFY14 performance in line

Mapletree Logistics Trust (MLT) reported 1QFY14 gross revenue of S$75.4m and NPI of S$65.3m, down 2.2% and 3.3% respectively. The decline was mainly due to a weaker JPY. Excluding the forex impact, gross revenue and NPI would have increased by 3.1% and 2.0% respectively. The impact of the depreciating JPY on distributable income was limited as ~90% of the amount is hedged into or derived in SGD. During the quarter, MLT also benefitted from lower borrowing costs and a S$0.6m distribution of the divestment gain from 30 Woodlands Loop (S$5.0m spread over eight quarters from 1Q). As a result, amount distributable to unitholders rose 6.9% YoY to S$44.0m, while DPU grew 5.9% to 1.80 S cents. Stripping out the divestment gain, DPU would be up 4.7% YoY. The results were in line with expectations, as 1Q DPU have met 24.8%/25.4% of our/consensus full-year DPU projections.

Underlying performance remains sound
Overall occupancy stood at 98.2%, largely stable from 98.5% seen in previous quarter. There was a 2.9ppt QoQ dip in MLT’s China portfolio occupancy due to a non-renewal of a tenant, but management noted that the space has since been leased out. For FY14, ~15% of the leases are due for renewal, and ~27% of these have already been renewed/replaced to-date. In addition, positive rental reversion of 17% was achieved. This is higher than prior quarter’s growth of 14%, although MLT maintains its view that the rate is set to moderate going forward.

Maintain HOLD on valuation grounds
MLT also updated that its redevelopment project at 21 Benoi Sector in Singapore is on track for completion in 3QFY14, and that the property is currently 94% pre-leased. This, we note, represents an improvement from its pre-commitment level of 75% as at 28 Jun. In the coming quarter, The Box Centre in Korea (acquired in Jul at NPI yield of 8.4%) will start contributing to MLT’s topline. We are keeping our forecasts and S$1.15 fair value intact for now as the results were within expectations. Maintain HOLD on MLT.

Mapletree Logistics Trust

OCBC on 2 Jul 2013

Mapletree Logistics Trust (MLT) announced that Menlo Worldwide Logistics has signed a binding commitment to lease 48,700sqm at MLT’s Mapletree Benoi Logistics Hub (MBLH) for a period of 10 years. Together with Menlo’s commitment which accounts for 55% of MBLH’s NLA, we understand the property is now 75% pre-leased, with the balance in the advanced stage of negotiation. We are positive on this development as it reflects continued healthy leasing demand and strong interest from major third-party logistics service providers. Judging from the strong pre-commitment levels, we believe that MLT will be able to meet its estimated yield-on-cost of 8-9%. In addition, we expect the long lease to further enhance MLT’s already resilient lease structure. However, as we have previously factored in the redevelopment project, we make no change to our forecasts. We maintain HOLD on MLT with an unchanged fair value of S$1.15.

Robust pre-commitment at MBLH
Mapletree Logistics Trust (MLT) announced that Menlo Worldwide Logistics, the subsidiary of NYSE-listed Con-way Inc, has signed a binding commitment to lease 48,700sqm at MLT’s Mapletree Benoi Logistics Hub (MBLH) for a period of 10 years. This agreement marks the latest expansion by Menlo in Singapore and lifts Menlo as MLT’s largest tenant (contributing 3.6% of MLT’s enlarged monthly gross revenue). Together with Menlo’s commitment which accounts for 55% of MBLH’s NLA, we understand the property is now 75% pre-leased, with the balance in the advanced stage of negotiation. 

Background on MBLH
MBLH is MLT’s first redevelopment project in Singapore. Formerly known as 21/23 Benoi Sector, the property commenced the refurbishment in 2011 and is scheduled for completion in 4Q13. It is strategically located within the Jurong Industrial Estate and is in close proximity to Jurong Port and easily accessible via expressways. When completed, MBLH will be transformed into a modern five-storey ramp-up warehouse with significantly enhanced features such as floor loading capacity of up to 40kN/sqm and a clear height of up to 12m. Total GFA is expected to increase by four folds from 22,500sqm to 92,500sqm, based on an increased plot ratio from 1.4 to 2.5.

Maintain HOLD on valuation grounds
We are positive on this development as it reflects continued healthy leasing demand and strong interest from major third-party logistics service providers. Judging from the strong pre-commitment levels, we believe that MLT will be able to meet its estimated yield-on-cost of 8-9% (development cost of ~S$128m). In addition, we expect the long lease to further enhance MLT’s already resilient lease structure. We make no change to our forecasts as we have previously factored in the redevelopment project. MLT is currently offering a 6.5% current yield, which is relatively attractive in our view. However, as the stock appears to be fairly priced when compared to our fair value of S$1.15, we maintain HOLD on MLT.

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.