SINGAPORE (June 17): DBS analysts Derek Tan and Dale Lai have maintained their “buy” calls on Mapletree Logistics Trust (MLT) due to the expected increase in adoption of e-commerce following nationwide shutdowns due to Covid-19.
“With supportive structural tailwinds in place, we believe MLT remains well placed to also acquire accretively,” say both analysts in a report dated June 12.
Tan and Lai have placed a price target of $2.05, from $1.85 previously.
Predicting an estimate of 75% of MLT’s revenues focused on the consumer-related sector, Tan and Lai expect MLT to see an increasing demand on the back of increased consumer adoption of e-commerce sales in the long run.
On the back of the Singapore warehouse subsector hitting a cyclical bottom in end 2019, the analysts also believe that the lowered supply of new warehouse spaces in 2020 will help support rents in the medium term.
The analysts have also priced in $350 million worth of acquisitions in FY21 with a bigger balance sheet, and an increased financial capacity to take on more.
“Looking ahead, we believe that MLT will continue to look for inorganic growth drivers with the Sponsor’s extensive pipeline still a key source. The most immediate should come from the Sponsor’s pipeline in Malaysia, Vietnam, China and potentially Japan,” they say.
Opportunities will also likely come from MLT’s sponsor which has an extensive pipeline of properties.
“We see a sizeable and growing pipeline of development properties which are approaching maturity that could be injected in the medium term. Given supportive capital markets (MLT is trading above NAV with an implied cost of capital of c. 6.5%), MLT has the ability to make earnings-accretive acquisitions,” they add.
However, Tan and Lai asks investors to keep an eye out for faster-than-projected acquisitions to its portfolio. They also warn against a better-than-expected outlook for the Singapore/China warehouse market, that may not bode well for MLT.
As at 4.05pm, units in Mapletree Logistics Trust are changing hands 1 cent higher, or 0.5% up at $1.94.
