Mapletree Logistics Trust - Stable, no negative surprises


■ 2Q FY16 results in line; strong leasing activity

■ Increasing our target price to SGD1.13 (from SGD1.12)

Reiterate Outperform (2) rating

What's new:
MLT announced its 2Q FY16 results on 19 October, after market hours. There were no surprises whatsoever and we reaffirm our Outperform (2) rating on the stock.

What's the impact:
Its revenue, net-property income (NPI), distribution, and distribution-per-unit (DPU) were all within 1% of our forecasts.

There was a partial income contribution from the SGD253m Coles Chilled DistributionCentre property in Sydney, which was acquired on 28 August 2015.

Its portfolio occupancy rate improved slightly QoQ from 96.6% to 96.9%. MLT disclosed that it has already renewed 77% of a total of 740,000 sq m of leased space due for expiry in FY16. The balance to be renewed in 2H FY16 represents about 5.4% of the portfolio’s net-lettable area. MLT did not disclose the average rental reversion of the renewed space for 1H FY16.

Of the 17 single-user asset (SUA) leases expiring in FY16, MLT has renewed or re-let 11 SUA leases. Of the remaining 6 SUA leases, 2 were converted to multi-tenanted buildings (MTBs), 2 are expected to be converted to MTBs, and 2 are undergoing redevelopment and divestment.

MLT’s gearing increased QoQ from 34.4% to 38.8%, due mainly to loans drawn from its acquisitions in Australia and Vietnam (totalling SGD293m). The weighted borrowing cost increased marginally QoQ from 2.2% to 2.3%. About 81% of total debt was fixed rate (or hedged to fixed rate).

Post results, we make minor changes to our DPU forecasts and raise our DDM-derived 12-month target price to SGD1.13 (from SGD1.12), due to a higher present value from the passage of time.

Technical Analysis
Daily Chart
What we recommend: 
We reiterate our Outperform (2) rating, and believe the 2Q FY16 results underscore the relative stability of MLT’s DPUs. A risk to our call would be disappointing results (negative rental reversions or weaker-than-expected DPU and NPI) in subsequent quarters.

How we differ:
Our DPU forecasts do not vary much from those of the Bloomberg consensus, and we have not incorporated any acquisition assumptions into our forecasts. However, we notice that the development projects in Asia of MLT’s sponsor continue to grow (3.2m sq m as at end September 2015 vs. 3.08m sq m as at end-June 2015) and this pipeline could be the foundation of strong medium-term DPU growth for MLT. (Read Report)

Read Related Report
1) Mapletree Logistics Trust - Acquisitions to Drive Growth by DBS Group Research, published on 20 October 2015

Source : Daiwa Capital Markets

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