Mapletree Logistics Trust

Kim Eng on 21 Jan 2013


3Q & 9M FY3/13 results inline. 9MFY3/13 revenue at SGD232m (+13% YoY) was 73% of ours and 76% of consensus estimate. 3QFY3/13 revenue at SGD77m (flat QoQ, +8% YoY), was 24% of ours and 25% of consensus estimate. 9MFY3/13 DPU at 5.13 SG-cts (+3% YoY) was 73% of ours and consensus estimates. 3QFY3/13 DPU at 3.53 SG-cts (+0.6% QoQ, +1% YoY) was 25% of ours and consensus estimates. Aggregate leverage inched down to 35.9% from 37% last quarter. Interest rate for 3QFY3/13 averaged 2.40% with an average term of debt of 4.1 years.

Portfolio review. Portfolio occupancy remains stable at 99.2%. MLT garnered 17% positive rental reversions from leases renewed/replaced in 3QFY3/13, mainly contributed by leases in Singapore and Hong Kong. To-date, of the 12.7% of leases (by NLA) due for renewal in FY3/13, the Manager has successfully renewed/replaced 85% of these. We also noted that the Japan portfolio suffered a 4.7% QoQ dip in revenue and 4.6% QoQ decline in NPI. This was attributed to the weakening of Yen against SGD. Nonetheless, management maintained that its impact on DPU is offset by its existing forex hedges.

Acquisition hotspots. For inorganic growth, MLT opined that it will focus more on acquiring assets in China, South Korea Malaysia or even Australia, but less in Japan. The recent Mapletree Wuxi Logistics Park (MWLP) acquisition (completed on 11 Jan) attests to this strategy. We understand that there is a scarcity of modern logistics facilities in China but with only seven properties (including MWLP), we doubt that MLT can scale fast enough to stand against big boys like Global Logistic Properties, which thrive on “network effect” and operational synergies.

Trading yield looks tight for further compression. From our estimates, the implied cap rate for MLT (based on 3QFY3/13 results) is 6%. The counter currently trades at 6.2% FY3/13 DPU yield, which we believe is almost near the end of its yield-compression cycle. We have factored in the completion of the MWLP acquisition. Pending further acquisitions and asset enhancement initiatives, we see limited near-term upside for now. Maintain HOLD with a TP of SGD1.16. We prefer A-REIT (TP: SGD2.60) which has more room for yield compression and DPU growth.