Mapletree Logistics Trust

Mapletree Logistics Trust: 2QFY16 in line on acquisitions; more room to grow overseas
Mapletree Logistics Trust (MLT) reported 2QFY16 DPU of 1.86¢ (-1.1% y/y, +0.5% q/q) ), meeting 49% of full year market estimate.

On the operational front, gross revenue and NPI grew 6.5% and 7.3% y/y to $87.5m and $73m respectively, underpinned by eight acquisitions across China, Korea, Singapore, Australia, and Vietnam, positive rental reversions and higher contributions from Hong Kong properties boosted by a stronger HKD.

Top line growth would have been higher if not for lower occupancies at several converted multi-tenanted buildings, ongoing redevelopment at 76 Pioneer, and weaker JPY and MYR partly mitigated by substantial hedging.

Property expenses rose 12.9% to $14.5m due to its enlarged portfolio as well as higher costs of converting single user assets to multi-tenanted ones in Singapore. This, coupled with higher borrowing costs of $10.5m (+30.9%) arising from acquisitions and capex, led to flat distributable income of $46.2m (-0.3%).

Portfolio occupancy improved 0.3ppt q/q to 96.9%, with weighted average lease to expiry increasing 17.1% to 4.8 years after 572,000sqm (18% of total portfolio) of leases were renewed, leaving 168,000sqm yet to be renewed in 2HFY16.

Aggregate leverage has risen to 38.8% (+4.4 ppt q/q) as MLT drew down $293m of loans for its Coles Chilled Distribution Centre (Australia) and Mapletree Logistics Park Bac Ninh (Vietnam) acquisitions as well as capex. Average debt tenor is 3.4 years with low interest cost of 2.3%, of which 81% is on fixed rates.

Management highlighted that while leasing activities have remained relatively stable, concerns over the weakening global economy have made clients more cautious.

Looking ahead, the trust plans to covert another two single tenanted properties into multi-tenanted ones and divest older low yielding assets. Development projects at 5B Toh Guan Road and 76 Pioneer Road are on tract for completion in 1QFY17 and 4QFY18. However, rental reversions are expected to continue to moderate amid the dull economic outlook.

The street remains sanguine on MLT’s push towards overseas markets with 64.3% of its portfolio value now derived from overseas assets against its target of 75% exposure.

At the current price, MLT trades at an annualised 1HFY16 yield of 7.2% and 1x P/B.

Latest broker ratings:
UOB Kay Hian maintains Buy with TP of $1.28
Daiwa maintains Outperform, raises TP to $1.13 from $1.12
Deutsche maintains Buy with TP of $1.10
OCBC maintains Hold, cuts TP to $1.04 from $1.13