Analysts from OCBC Investment Research (OIR) and UOB Kay Hian are maintaining “hold” on Mapletree Logistics Trust (MLT) despite the REIT’s results for the 1QFY2021/2022 ended June coming in line with their expectations.
The analysts have also kept their target prices at $2.10 and $2.08 for OCBC and UOB Kay Hian respectively.
On July 19, MLT reported distribution per unit (DPU) of 2.161 cents for the quarter, 5.7% higher than 1QFY2020/2021 DPU of 2.045 cents.
This was the second straight quarter where MLT has managed to increase its DPU by over 5% on a y-o-y basis.
Amount distributable to unitholders rose 19.1% y-o-y to $92.7 million.
The lower DPU increment was due to the REIT’s enlarged unit base following the equity fund raising completed in the 3QFY2020/2021.
See also: Mapletree Logistics Trust ups DPU on 23.7% growth in revenue in 1Q21/22
The team at OCBC foresees the REIT having “tougher inorganic growth opportunities” ahead despite the strong results.
Cap rate compressions across several of MLT’s key markets such as Australia, Hong Kong and Japan, however, have made it more difficult for the REIT to find “compelling acquisition targets”, says the OCBC team in a July 21 report.
The compression in cap rates “would make inorganic growth opportunities tougher to find, especially for portfolio acquisitions given that these tend to come at a premium,” it writes.
That said, the team expects MLT to remain “relatively resilient” compared to its peers in the current macroeconomic environment due to its diversified logistics portfolio spread.
MLT’s resilience is also attributed to its management’s “strong executive capabilities” and portfolio capital recycling strategy.
To this end, the team at OCBC also sees MLT as a “key beneficiary of the structural shift towards more robust e-commerce growth trends ahead”.
Potential catalysts identified by the team include stronger-than-expected recovery in logistics rents, DPU accretive acquisitions and the distribution of divestment gains from capital recycling activities.
On the flip side, investment risks include a spike in interest rates that may increase the REIT’s borrowing costs, foreign currency risks and rental default by its key tenants.
UOB Kay Hian analyst Jonathan Koh also sees a potential slowdown in acquisitions made by the REIT amid falling vacancies and a receding supply in China in 2022.
“Thus, it is more conducive for MLT to acquire logistics properties in China from sponsor Mapletree
Investments in FY2023 when rents have stabilised,” Koh writes in a July 21 report.
The slowdown in acquisitions is also expected to slow down as MLT is relying mainly on third-party vendors in FY2022, says Koh.
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Following his unchanged target price, Koh has also kept his DPU estimates unchanged for the REIT.
Catalysts to MLT’s share price includes accretive acquisitions to “rejuvenate and reposition towards modern specifications logistics facilities, domestic consumption and e-commerce”, he says.
As at 10.34am, units in MLT are trading 1 cent higher or 0.5% up at $2.10, or 1.6 times P/B, according to OCBC’s estimates.
Photo: MLT
