Analysts are positive on Mapletree Logistics Trust (MLT) following its latest 3QFY2022 ended December 2021 results announcement, which saw DPU for the period come in at 2.185 cents, some 5.8% higher than 2.065 cents last year.
Gross revenue was $166.9 million, a 19.3% y-o-y increase, which brought net property income (NPI) to 17.4% higher y-o-y at $146.4 million. This growth was thanks to higher revenue contribution from existing properties, contributions from accretive acquisitions completed in 9MFY2022 and FY2021, as well as lower rental rebates granted to eligible tenants impacted by Covid-19.
MLT achieved overall portfolio rental reversions of 2.5% in 3QFY2022, an improvement from 2.2% in 1QFY2022 and 2.4% in 2QFY2022. MLT’s portfolio occupancy stood at 97.8%, and has remained unchanged for three consecutive quarters.
Meanwhile, occupancy in Japan saw a slight 0.5 percentage points (ppt) increase to 96.7%, Hong Kong grew 0.2ppt to 99.9% and South Korea gained 0.4ppt to 98.8%. This growth was partially offset by a 0.9ppt decline in Malaysia to 99.1%. Full occupancy was achieved in Vietnam and Australia.
See: Mapletree Logistics Trust posts 5.8% growth in 3QFY2022 DPU to 2.185 cents
Following that, OCBC Investment Research is keeping its “buy” call on MLT with a fair value estimate of $2.05.
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In a Jan 31 report, the OCBC Research Team likes the stock for its diversified logistics portfolio, with presence in key Asian markets, such as Singapore, Hong Kong, Japan, Australia, Vietnam, China and India. The trust’s management has also shown strong execution capabilities, and its portfolio capital recycling strategy has also resulted in net divestment gains being distributed to unitholders.
“Although MLT will not be immune to uncertainties in the macroeconomic environment, we expect it to remain relatively more resilient vis-à-vis its peers. We also see MLT as a key beneficiary of the structural shift towards more robust e-commerce growth trends ahead,” says the research team.
Looking ahead, MLT remains sanguine on the outlook of the logistics sector, and believes there is further room to deepen its presence in existing markets or even penetrate into new countries in Asia-Pacific.
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In terms of financial position, MLT’s aggregate leverage ratio declined from 38.2% in Sept 30, 2021, to 34.7%, as its equity fund raising exercise was completed ahead of the completion of its acquisitions, which means aggregate leverage should increase again in 4QFY2022 to about 39%, according to the research team, who also notes that 79% of MLT’s borrowings have been fixed/hedged.
Management has also guided that it was looking at potential divestments of $200-400 million over the next 12 months, and is prepared to push its gearing slightly above 40% should inorganic growth opportunities arise. It is also ready to pursue a strategy of acquiring more un-stabilised assets in markets where it has an established presence, on the view that it will be able to ramp up the property’s occupancy to approximately 90% within 12 months of purchase.
On the other hands, Maybank has also kept its “buy” recommendation on MLT with an unchanged target price of $2.35.
Analyst Chua Su Tye not only likes the stock for its steady 3QFY2022 quarter, but also believes that DPU visibility remains strong, underpinned by resilient occupancies from steady demand growth, and upside to rents in FY2023, for its well-placed logistics assets under management (AUM). Chua is also upbeat on the management’s efforts to further deal momentum to drive AUM growth, and upping its pace of divestments against tightening cap rates.
The analyst notes that portfolio rental reversion was overall better, led by leases in Vietnam (at +4.0%), Malaysia, South Korea and Japan (all +3.0%), Hong Kong (+2.9%) and China (+2.8%). Management believes its reversions in Japan, which rose from +1.5% in the previous quarter could be sustained.
Leasing momentum has also remained strong at about 339,000 sqm renewed or replaced during the quarter. This represents 79% of all expiring leases and 5.0% of MLT’s portfolio.
Single-asset expiries over FY2023-FY2024 are low at 2.4-6.0% while weighted average leasing expiry (WALE) by NLA was stable at 3.6 years (versus 3.7 years in 2QFY2022).
“We expect occupancy to remain resilient, as demand continues to be led by e-commerce tenancies and 3PLs, and we see room for rental recovery to strengthen in coming quarters,” says Chua, who overall likes the stock for its sound balance sheet and accelerated pace of divesting.
As at 12.15pm, units in MLT are trading at $1.73 or 1.2 times FY2022 NAV with a DPU yield of 5.1%, according to OCBC’s estimates.
