Mapletree Logistics Trust
STI : 3,133.76
Price Target : 12-Month S$ 1.16
•3QFY14 results in line; YTD net income is 77% of forecast
•Future growth to be driven by acquisitions/ developments, portfolio earnings remain resilient
•Maintain BUY rating and S$1.16 TP
Resilient quarter fueled by strong rental reversions. Despite being hit by a weak JPY-S$ exchange rate, Mapletree Logistics Trust (MLT) reported resilient results – topline and net property income came in at S$78.1m (+0.9% y-o-y) and S$67.4m (-0.2% y-o-y) respectively. Forex losses were mitigated by strong rental reversions of up to 23% mainly for properties in Singapore and Hong Kong, and the acquisition of two properties in the year. Excluding the forex impact, topline would have grown by a stronger 4.8% y-o-y. Average portfolio occupancy remained steady at 98.4%. Distributable income grew 7.7% to S$45.0m (DPU 1.82 Scts), supported by a lower effective interest rate of 1.9%.
Most overseas income hedged. MLT has hedged up to 95% of its distribution derived from overseas. Most importantly, it has substantially hedged its JPY exposure for the next two years, and the impact of a weak JPY-S$ is likely to be delayed.
Acquiring property in Malaysia, will lift earnings from 2HFY15. MLT will be acquiring an industrial property in Iskandar Malaysia from its sponsor, Mapletree Industrial Fund, a closed end fund managed by Mapletree Investments. The total consideration of MYR88.5m (S$34.3m) is priced at an attractive 8.4% yield (vs 7.1% for its existing Malaysia portfolio) and at c.5% discount to the latest valuation. The property will be leased on a 12-year master lease to LCTH Corp, expiring in May ’20. This acquisition is in line with expectations (we forecast S$100m worth of acquisitions).
Being selective with future acquisitions. Given the current competitive market conditions, MLT will be selective with future acquisition opportunities and we believe a likely source to come from its sponsor’s pipeline. In addition, MLT will be starting on a development of another warehouse project at Toh Guan, which is expected to contribute positively in the medium term.
Attractive yield; BUY, TP S$1.16. We nudged up earnings after imputing lower interest rates. We like MLT for its attractive yields of 7.1%-7.2%, supported by strong underlying fundamentals.
Publish date: 22/01/14