Analysts from DBS Group Research, Maybank Kim Eng and OCBC Investment Research have kept their “buy” calls on Mapletree Logistics Trust (MLT) following the REIT’s 4QFY2021 results on April 21.
CGS-CIMB Research is the only brokerage of the four to maintain “hold” on the REIT.
That said, the analysts from all four brokerages agree that the REIT’s DPU of 2.161 cents for the 4QFY2020/2021 ended March has met or surpassed their estimates for the quarter.
See: Mapletree Logistics Trust posts 5.5% growth in 4Q20/21 DPU of 2.161 cents
DBS analysts Derek Tan and Dale Lai says they “remain positive” on MLT with a higher target price of $2.35 from $2.20 previously.
The way they see it, the REIT “should continue to ride on the robust fundamentals for logistics properties post-Covid”.
Furthermore, Tan and Lai believe that MLT is “well placed” to make accretive acquisitions.
The analysts note that their estimates are more optimistic than their peers.
“MLT has taken significant steps to anchor itself as one of the leading logistics solutions providers through a $1.0 billion acquisition of a portfolio of modern warehouses in China, Malaysia and Vietnam,” they write.
“The good response to its equity fund-raising (EFR) exercise has infused MLT with additional debt-funded capacity which could see another $400 million worth of acquisitions (to optimal gearing of 40%) materialising by the end of FY2021.”
To Tan and Lai, MLT is aiming for another banner year to drive distributions, with the manager seeing acquisitions as a “key driver” for the FY2022.
“The manager is reviewing and may potentially make third-party acquisitions from South Korea, Japan while India remains a new market that the REIT would like to increase its exposure in,” write the analysts.
“We have reviewed our acquisition estimates and now price in $500 million worth of deals by the end of FY2022,” they add.
“We are optimistic that MLT can deliver on both organic and inorganic growth and with 42% of its tenants in multi-locations, MLT is well placed to ride on the burgeoning growth of Asia’s logistics sector… We believe that MLT can deliver on more acquisitions which are not priced in by consensus.”
Maybank Kim Eng’s Chua Su Tye has also upped his target price estimate to $2.25 from $2.20 previously, on the back of MLT’s “strong” quarter.
“We expect occupancies to remain resilient on the back of steady demand growth, and raised DPUs by 2% on better rental assumptions, and to factor in its maiden India deal,” writes Chua.
The REIT may have missed acquiring Blackstone’s $4.1 billion Australian industrial portfolio given the recent share price weakness, but its debt headroom at $2.8 billion with a 50% limit is “ample to fund further deals,” says Chua.
Like DBS’s Tan and Lai, Chua says he expects “management will look to add from its sponsor in China, Malaysia and Vietnam, and third-parties in South Korea and Australia, at potential +1-2% accretion to DPUs”.
MLT is the second largest industrial S-REIT backed by sponsor Mapletree Investments under Temasek Holdings.
Its portfolio has grown from 15 Singapore properties valued at $422 million from its IPO in 2005 to 163 logistics assets valued at $10.8 billion as at end-March.
The research team at OCBC Investment Research (OIR) has, on the other hand, reduced its fair value estimate to $2.10 from $2.17 previously.
The decline comes after “adjustments and increasing our risk-free rate assumption from 1.55% to 1.9%”, it writes.
That said, the team expects MLT to remain relatively more resilient compared to its peers.
It adds that it sees “MLT as a key beneficiary of the structural shift towards more robust e-commerce growth trends ahead.”
“However, given the rotation play to value and laggards, MLT’s share price has recently underperformed and we view this as a buying opportunity for investors with a medium to longer-term horizon,” it adds.
The team has identified “stronger-than-expected recovery in logistics rents”, accretive acquisitions to DPU and distribution of divestment gains as potential share price catalysts.
Conversely, investment risks include rental defaults by its key tenants will lead to the REIT’s “potential loss of income and downtime”, a spike in interest rates, as well as foreign currency risks.
CGS-CIMB analysts Lock Mun Yee and Eing Kar Mei are the only ones among the brokerages to keep their “hold” call on MLT, albeit with an unchanged target price of $2.10.
While the analysts consider the REIT to have “sound operations”, with new acquisitions to boost its income for the FY2022, MLT’s FY2022 dividend yield of 4.4% is on the lower end compared to its industrial REIT peers.
That said, Lock and Eing say they are positive on MLT for its pan-Asian logistics asset focus and have upped their FY2022-FY2023 DPU estimates by 1.92% to 1.94% “as we fine-tune our projections post results as well as factor in new contributions from the South Korea and India acquisitions”.
Units in MLT closed flat at $1.97 on April 23, or 1.4 times price-to-book, according to Maybank Kim Eng’s estimates.
