Analysts at UOB Kay Hian (UOBKH), DBS Group Research, Maybank Securities and Citi Research are mixed on Mapletree Logistics Trust M44U (MLT) following its results for 3QFY2024 ended December.
UOBKH analyst Jonathan Koh, who has maintained “buy” on MLT with a higher target price of $1.98 says the trust’s 3QFY2024 results were a mixed bag. For one, MLT generated healthy rental reversions of 3.8% driven by Singapore, Australia and South Korea, despite the drag from China.
China’s overall occupancy levels remain the lowest across MLT’s markets at 93.1%. This is due to the still subdued operating conditions, especially in Tier-2 cities in China where the current oversupply situation remains a key overhang, says DBS analysts. The analysts are maintaining their “buy” call and target price of $1.88.
Citi analyst Brandon Lee points out that China’s leasing environment will remain challenging, with negative reversions expected to persist over the next few quarters with a blended rate of low-teens and a very murky bottom. Hence, MLT needs to see greater clarity before making a decision on its optimal exposure in China over the long-term, he adds.
To this end, MLT will focus on rejuvenating its portfolio towards modern and high-specs logistics properties, Koh highlights. The trust management intends to expand in growth markets, such as Malaysia, Vietnam and India while Hong Kong and Japan remain attractive due to tight supply, especially at prime locations.
Moving forward, DBS remains positive in MLT’s diversified exposure, as the outlook for developed markets such as Singapore, Japan, Australia and Asia Pacific excluding-China continues to be robust with the logistics markets remaining in a landlord’s market.
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Citi’s Lee concurs, adding that at the existing valuations of 1.17x P/B — which is the cheapest among the top three industrial S-REITs — and FY2024/FY2025 yield of 5.3%/5.4% respectively, majority of the negatives have likely been priced in, with the management’s proactive portfolio rejuvenation strategy likely to result in upside risk to DPU.
Lee is maintaining “buy” on MLT with a target price of $1.85.
Meanwhile, Maybank analyst Krishna Guha has downgraded MLT to “hold” from “buy” previously. “While logistics continues to be an attractive sector, sluggish recovery in China, competition from oncoming new supply and rising vacancy make us pause,” he explains.
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The analyst has also lowered his estimates, although the target price is raised slightly to $1.70 to factor in a lower discount rate.
As at 10.45am, units in MLT are trading 1 cent lower or 0.64% down at $1.55.
