Mapletree Logistics Trust

Kim Eng on 31 Aug 2012

Capital Recycling. MLT has recently announced that it will be acquiring Hyundai Logistics Centre (HLC) in South Korea at SGD24.3m with an initial NPI yield of 9%. It will also be divesting 30 Woodlands Loop in Singapore (FY3/12 NPI yield-on-cost of 6% according to our estimates) at a sale consideration of SGD15.5m, booking a net disposal again of ~SGD4.96m. Both transactions will complete by 3QFY3/13 and Feb 2013 respectively. Gearing is expected to increase marginally to 37.2% upon completion of both transactions.

Our estimates. HLC is currently leased to E-Land World and ENVICO. We expect the acquisition to complete by Oct 2012 and have factored in modest rental escalations of 1.5% p.a. At existing 1QFY3/13 portfolio yield of 6.5%, we think this acquisition will be yield-accretive. We revise our DPU estimates by 0.3%-0.5% over FY3/13-FY3/16.

Still the highest WALE in the industry. MLT’s assets have increased by almost ninefold since the company listed in July 2005. Given its larger asset base, we expect further scale advantages ahead. MLT also has one of the industry’s highest weighted average lease expiry profiles (six years vis-à-vis AREIT’s four years). Despite having exposure to seven overseas markets, Singapore Japan and South Korea (tier-1 mature markets) constitute 76.3% of revenue and 76.4% of NPI in FY3/13 and 78% of our FY3/13 GAV, which should prove defensive in volatile markets.

Yields can be compressed by another 53bps. From our estimates, the implied cap rate for MLT (based on 1QFY3/13 results) is 6.09%. If we take this cap rate as the floor for FY3/13 DPU yield, we believe yields can still be compressed by another 53 bps from our forecasted FY3/13 DPU of 6.6%. This dovetails neatly with our DDM-derived TP of SGD1.17. We are confident that MLT’s stable assets and rental income resilience will help it navigate the choppy waters ahead. Reiterate BUY.