Mapletree Logistics Trust

Mapletree Logistics Trust (MLT): 1QFY16 results met estimates despite the slippage in distributable income and DPU to $45.8m (-2% y/y)and 1.85¢ (-3%) respectively due to a 18.9% surge in borrowing costs to fund its new acquisitions.

At the operating level, gross revenue and NPI rose 5% and 3% to $85.1m and $71.1m, respectively, boosted by contributions from six new acquisitions and a 5% upward reversion for properties in HK and Singapore.

However, this was partly offset by:
1) Lower occupancy at several recently converted multi-tenanted buildings;
2) Absence of revenue from 5B Toh Guan Road East due to an ongoing redevelopment
3) Impact of a weaker JPY.

Property expenses grew 15.8% mainly due to the enlarged portfolio and higher costs associated with the conversion of single-tenanted into multi-tenanted properties in Singapore.

Portfolio occupancy dipped marginally by 0.1ppt q/q to 96.6%, with weighted average lease to expiry of 4.1 years.

Aggregate leverage stood at 34.4% but is expected to climb to 38.2% upon completion of two ongoing acquisitions, Mapletree Logistics Park Bac Ninh (Vietnam) and Coles Chilled Distribution Centre (Australia).

In the markets where MLT operates, customers are generally cautious about capacity expansion although demand for logistics space has remained stable.

Market watchers are generally positive on MLT's portfolio rejuvenation and active management, but margins are expected to remain under pressure given the continued conversions and rising industry supply.

At the current price, MLT trades at an annualized 6.4% and 1.1x P/B.