Tuesday, April 16, 2013

Mapletree Logistics Trust: Valuation looks fair now (OCBC)


Mapletree Logistics Trust:
Fair value S$1.34
add: 12m dividend forecast S$0.07
versus: Current price S$1.31

Valuation looks fair now
• Positive expectations likely factored in
• Caution on various fronts
• Further upside appears limited

We believe investors are finally acknowledging Mapletree Logistics Trust’s (MLT) attractiveness, as evidenced by its recent strong unit price performance. At a P/B ratio of 1.45x, however, we believe MLT is now fairly priced.
While ~55% of its revenue is derived from overseas assets, we are mindful that a substantial 658k sqm of supply in warehouse space is expected to be delivered to the Singapore warehouse market in 2013. This is likely to exert pressure on warehouse occupancy rates as well as cap the rise in rentals and the rate of positive rental reversions achieved by MLT in the near term. In addition, the introduction of the cooling measures in the industrial market and upfront land premium by JTC has inevitably made investors more cautious as it may now be more onerous for industrial landlords to acquire properties. Given the market conditions, we believe that any upside in MLT’s units is limited at the current juncture. Downgrade MLT from Buy to HOLD on valuation grounds. Our fair value is now raised from S$1.25 to S$1.34 as we tweak our RNAV assumptions and roll over our valuation to FY14.

Strong recent price performance
Mapletree Logistics Trust’s (MLT) units have performed very well since our last report on 25 Mar, notching a 8.7% gain versus a 1.5% increase in the STI and 4.9% increase in the FTSE ST REIT Index. We believe investors are finally acknowledging MLT’s attractiveness due to a confluence of factors. Firstly, MLT is likely to put on a good showing for its 4QFY13 results on 17 Apr, with DPU possibly accelerating 5.8% YoY to 1.80 S cents on the back of incremental rental income from its newly acquired Korea and China properties. Secondly, MLT is likely to record a meaningful gain in its asset values as part of the annual revaluation exercise, and this may in turn boost its NAV and improve its gearing level. In addition, the sweeping monetary easing by Bank of Japan announced last week has likely spurred much interest in MLT’s units, as it is expected to benefit from its exposure in Japanese properties.

Unit looks fairly priced now
At a P/B ratio of 1.45x, however, we believe MLT is now fairly priced. While ~55% of its revenue is derived from overseas assets, we are mindful that a substantial 658k sqm of supply in warehouse space (8.9% of total 4Q12 warehouse stock) is expected to be delivered to the Singapore warehouse market in 2013. This is likely to exert pressure on warehouse occupancy rates as well as cap the rise in rentals and the rate of positive rental reversions achieved by MLT in the near term. In addition, with the introduction of the cooling measures in the industrial market and upfront land premium by JTC, investors are inevitably more cautious as it may now be more onerous for industrial landlords to acquire properties. Given the market conditions, we believe that any upside in MLT’s units is limited at the current juncture.

Downgrade to HOLD
We tweak our RNAV assumptions and roll over our valuation to FY14. This raises our fair value from S$1.25 to S$1.34. Downgrade MLT from Buy to HOLD on valuation grounds.



Source/Extract/Excerpts/来源/转贴/摘录: OCBC Investment Research
Publish date: 12/04/13

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