Analysts have reiterated their “buy” and “add” calls for Mapletree Logistics Trust (MLT) after the REIT posted its results for the 1QFY2024 ended June on July 25.
All the brokerage houses - CGS-CIMB Research, Maybank Securities and OCBC Investment Research (OIR) - note that MLT has had a stable portfolio occupancy, but China has proven to be a challenging environment to operate in so far.
MLT reported a stable distribution per unit (DPU) of 2.271 cents for the three-month period. Gross revenue fell by 2.9% y-o-y to $182.2 million, while net property income (NPI) fell 3.1% y-o-y to $158.1 million due to weaker foreign exchange (forex) especially the depreciation of the Chinese yuan, the Japanese yen, Korean won and the Australian dollar against the Singapore dollar. Higher interest expenses also led to the decline in NPI.
That said, the REIT’s results were mitigated by a better performance in Singapore, contributions from recent acquisitions and the distribution of $8.435 million from divestment gains and writeback of provision for capital gains tax.
CGS-CIMB’s Lock Mun Yee and Natalie Ong deem the REIT’s performance to be “broadly in line”, at 26.3% of their full-year forecast.
They have also kept their DPU estimates for the FY2024 to FY2026 unchanged, with no pre-emptive new acquisitions or divestments factored into their current estimates.
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Their target price of $1.88 is also unchanged.
More accretive acquisitions and accelerated asset recycling activities are potential upside catalysts, in their view, while a slow macro outlook that would hamper the rental growth outlook and adversely impact its portfolio value, and a continued challenging operating environment in China that will continue to drag on rental reversions, are downside risks.
Maybank Securities’ Krishna Guha has also kept his target price at $1.80 as he deems MLT’s set of results to be “resilient”.
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Despite the current macroheadwinds, Guha sees that the REIT’s portfolio should benefit in the medium term from structural tailwinds and regional growth.
However, he has lowered his DPU estimate for the FY2024 by 1.7% due to lower contribution from China.
“We like MLT’s regional network of warehouses and proactive asset management,” he says, while noting that a weaker Chinese economy, forex volatility and a slower pace of capital recycling are potential downside risks.
In China, particularly, while MLT’s reversion in the country was flat this time, Guha sees that its Chinese portfolio may witness a negative reversion of at least 10% with about 13% of net lettable area (NLA) due for renewal for the rest of this fiscal year.
“Management is cognizant of the challenges and has been able to renew about 3% in the quarter while keeping occupancy unchanged,” he says.
The team at OIR has upped its target price to $1.85 from $1.80 previously, the only brokerage to do so, with MLT’s latest set of results coming in above its expectations at 26.0% of its full-year forecast.
In its report, the team is positive on MLT’s inorganic growth in the emerging markets of Vietnam, Malaysia and India as well as its plans for asset sales and potential divestments.
For this reason, OCBC Investment Research has raised its FY2024 and FY2025 DPU forecasts by 1.3% and 1.6% respectively, on lower cost of debt assumptions.
Units in MLT closed 1 cent higher or 0.59% up at $1.72 on July 26.
