MAPLETREE Logistics Trust

DBS Group Research on 20 Nov 2012

MAPLETREE Logistics Trust (MLT) announced that it is proposing to acquire Wuxi International Logistics Park (WILP) from its sponsor Mapletree Investments Pte Ltd. The purchase price of 116 million yuan ($22.8 million) implies an initial yield of 8.0 per cent, and is higher than the implied net property income yield of 6.0 per cent for its China properties. We note that MLT has the financial capacity to fund these acquisitions, and gearing is expected to stay relatively stable at 37.3 per cent (assuming 100 per cent debt funding).

While the acquisition is accretive, impact on DPU is estimated to be minimal at less than one per cent. Completion of this deal is expected in March 2013, and will grow MLT's portfolio to 111 properties with a total appraised value of $4.2 billion.

This acquisition highlights management's emphasis on bringing the trust back on the growth track and is in line with MLT's investment strategy in expanding its presence in "growth markets" like China. The proposed acquisition of WILP will be the trust's third acquisition from its sponsor's development pipeline, and is leased to a strong pool of tenants including Wuxi HiTech, Kerry Logistics, Fiege International Freight Fowarder and Konoike Logistics.

"Buy" maintained, $1.22 target price based on discounted cash flow. No change to our earnings estimates as we have previously forecasted close to $200 million worth of acquisitions in our numbers. Yields of close to 6.5 per cent remain attractive, in our view, for its large-cap, quality sponsor status. Further re-rating catalyst is likely to hinge on the manager's continued ability to continue sourcing for accretive acquisitions - either from its sponsor or from third party sources - to grow its portfolio and distributions meaningfully.
BUY