Mapletree Logistics Trust

OCBC on 13 Mar 2012


Mapletree Logistics Trust (MLT) announced yesterday that it will be acquiring a portfolio of seven dry warehouse facilities in Japan from Goodman Japan Limited for a total consideration of JPY17.5b (~S$292m). According to management, the acquisition is expected to be DPU-accretive, generating a stabilized weighted average NPI yield of ~6.2%. This is higher than the implied NPI yield of 5.6% for MLT’s existing Japan portfolio. We understand that management intends to fund the investment through a combination of debt and proceeds raised from the issuance of its S$350m perpetual securities. When the acquisition is completed (likely in Apr 2012), MLT’s aggregate leverage may come around 38%, as compared to 41.4% as at 31 Dec 2011. We maintain our BUY rating with a revised fair value of S$1.20 (S$1.18 previously) on MLT.

Details of acquisition assets
Mapletree Logistics Trust (MLT) announced yesterday that it will be acquiring a portfolio of seven dry warehouse facilities in Japan from Goodman Japan Limited for a total consideration of JPY17.5b (~S$292m). All seven logistics facilities, we note, are built with modern specifications and are strategically located within key logistics hubs in the Hokkaido, Greater Tokyo, Nagoya and Osaka regions. The properties also have a young weighted average building age of 4.9 years and allow for an additional 30,000 sqm of GFA (24.1% of existing aggregate GFA) when their permissible plot ratios are maximized.

Favourable NPI yield and lease duration
According to management, the acquisition is expected to be DPU-accretive, generating a stabilized weighted average NPI yield of ~6.2%. This is higher than the implied NPI yield of 5.6% for MLT’s existing Japan portfolio. Presently, the properties are 100% leased to quality, single users for the next 5-25 years, with a weighted average lease to expiry of 9.3 years. This should provide strong and predictable cash flow to MLT’s rental revenue, as well as customer and geographical diversification, in our view.

Perpetual securities to fund part of purchase consideration
We understand that management intends to fund the investment through a combination of debt and proceeds raised from the issuance of its S$350m perpetual securities. When the acquisition is completed (likely in Apr 2012), MLT’s aggregate leverage may come around 38%, as compared to 41.4% as at 31 Dec 2011. Going forward, we believe that eyes will be on the successful deployment of the remaining proceeds on yield-accretive investments, so as to make up for shortfall in distributable income resulting from the distribution payment of the perpetual securities. As for now, we factor in the impact from the perpetual securities issuance and acquisitions into our FY12-13 forecasts. This raises our RNAV-based fair value from S$1.18 to S$1.20. We maintain our BUY rating on MLT.

Mapletree Logistics Trust

OCBC on 8 Mar 2012


Mapletree Logistics Trust (MLT) announced early this week that it is considering the issuance of SGD-denominated perpetual securities. We view the initiative positively, as it provides the much-needed ammunition for its acquisition plans and to pare down its aggregate leverage. At the investor presentation held on 6 Mar, management also took the opportunity to share with us its growth plans across different geographical locations. We are confident that MLT will be able to continue optimizing its portfolio yield, given its disciplined approach towards acquisitions. We are holding off revising our estimates pending more details on the securities issuance. However, as we roll over valuations to FY13 and factor in the recent acquisitions in Malaysia, our fair value is now raised to S$1.18 (S$1.10 previously). Maintain BUY on MLT.

Proposed issuance of perpetual securities
Mapletree Logistics Trust (MLT) announced earlier this week that it is considering the issuance of SGD-denominated perpetual securities. We view the initiative positively as it provides the much-needed ammunition for its acquisition plans. As the perpetual securities are expected to be fully accounted as equity, the issuance also has the effect of paring down MLT’s aggregate leverage. Based on our conversations during an investor presentation held on 6 Mar, we estimate that the aggregate principal amount may fall in the range of S$300-500m, with a five-percent handle for its distribution rate. Together with an expected positive revaluation of its properties in the coming Mar quarter, we believe its leverage may be brought down from 41.4% as at 31 Dec 2011 to a more comfortable 36.5-38.5% level.

Prudent approach towards investments
Management also took the opportunity to share with us its growth plans across different geographical locations during the presentation. In particular, MLT reiterated that it has been careful not to rush into investments but rather work closely with its sponsor on various overseas acquisitions – a prudent move in our view, given the current uncertain market conditions. The group also highlighted that there are ~S$300m worth of pipeline assets from sponsor that are completed, and that it may acquire some of them during the course of the year. We are confident that MLT will be able to continue optimizing its portfolio yield, given its disciplined approach towards acquisitions. We note that its acquisition of two properties in Malaysia just a week ago were made at attractive initial NPI yields of 8.7-8.8%, significantly higher than the implied yield of 7.1% for its existing Malaysia portfolio.

Retain BUY
We will hold off revising our estimates pending more details on the securities issuance. However, as we roll over valuations to FY13 and factor in the recent acquisitions, our fair value is now raised to S$1.18 (S$1.10 previously). Maintain BUY on MLT.

Mapletree Logistics Trust

DBS on 29 Feb 2012

Acquisition of two industrial warehouse properties in Malaysia: Mapletree Logistics Trust (MLT) announced the proposed acquisition of two industrial warehouse properties located within Iskandar Malaysia, for a total consideration of RM59 million (S$24.6 million). The purchase price implies an initial yield of 8.7-8.8 per cent, which is higher than the implied NPI yield of 7.1 per cent for its Malaysian properties. Deal size is relatively small in comparison to its portfolio and we believe that MLT has the financial and funding capacity to fund these acquisitions.

Gearing is expected to stay relatively stable (assuming 100 per cent debt financed) while DPU impact is estimated to be minimal at less than one per cent. Completion of this deal is expected in H2 FY2012, and will grow MLT's portfolio to 100 properties with a total appraised value of S$3.77 billion.

Quality tenants within an emerging industrial hub: The manager has once again shown its ability to source for accretive deals and we see the following positives: (i) The properties will be leased back to quality end users - Padiberas Nasional Berhad (a major supplier in the Malaysian paddy and rice industry) and Celestica (AMS) Sdn Bhd, a leading global EMS company, which implies strong credit quality and cashflows, and (ii) MLT is an early mover within Iskandar Malaysia, an emerging regional investment hub within Asia. Governmentefforts towards promoting investors' interest in the region through upgrading of supporting infrastructure and policies should enable MLT to tap the anticipated growing demand for quality warehouse space in the medium term.

BUY maintained, $1.07 TP based on discounted cashflow model: Yields of close to 7.6 per cent remain attractive in our view for its large cap, quality sponsor status. Re-rating catalysts likely to hinge on the manager's ability to continue sourcing accretive acquisitions and potential acquisition of sponsor's pipeline properties that will grow its portfolio meaningfully.
BUY

MapletreeLog

OCBC Research on 20 Jan 2012

Mapletree Logistics Trust (MLT) delivered a 9.7% YoY growth in 4QFY12 DPU to 1.70 S cents, in line with both our and consensus expectations. Going forward, management guided that MLT’s organic growth is likely to slow as the portfolio is operating at near full capacity and as the economic climate remains murky in the near term. However, average occupancy rate is expected to remain stable. On the M&A front, MLT revealed that more investment opportunities have resurfaced. Above-than-industry-average leverage of 41.4% remains our key concern, but refinancing risk is a non-issue with MLT’s recent refinancing of its JPY9b loans. Maintain BUY with higher fair value of S$1.10 (S$1.07 previously) after rolling our RNAV valuation to 2012.

Consistent set of results. Mapletree Logistics Trust (MLT) reported its 4QFY12 results last evening. NPI increased by 14.4% YoY to S$61.6m due to contributions from its acquisitions and organic growth (better rental and occupancy rates) from its existing portfolio. Distributable amount similarly grew by 12.2% YoY to S$41.3m, though impacted slightly by higher borrowing costs and other expenses. For the quarter, DPU stood at 1.70 S cents, up 9.7% YoY. This brings the total YTD DPU to 6.54 S cents, representing a yield of 7.6%. The results were within both our and consensus expectations, with YTD DPU forming 103.4%/97.6% of our/consensus DPU estimates.

Healthy portfolio performance. Portfolio operating performance continues to be healthy, in our view. Overall occupancy rate was maintained at a high level of 98.8% (99.0% in 3Q). In addition, positive rental reversions of 16% for renewal/replacement leases were still seen during the quarter (9% rental reversions if conversion of 7 Tai Seng Drive to multi-tenanted building was excluded). As at 31 Dec, the weighted average lease to expiry was steady at ~6 years, with only 12.8% of its leases by NLA due to expire in FY13.

Reiterate BUY. Going forward, management guided that MLT’s organic growth is likely to slow as the portfolio is operating at near full capacity and as the economic climate remains murky in the near term. We also note that there was a mild slowdown in the enquiry level, although average occupancy rate is expected to remain stable. On the M&A front, however, MLT revealed that more investment opportunities have resurfaced. Above-than-industry-average leverage of 41.4% remains our key concern, but refinancing risk is a non-issue with MLT’s recent refinancing of its JPY9b loans. Maintain BUY with higher fair value of S$1.10 (S$1.07 previously) after rolling our RNAV valuation to 2012.