SINGAPORE (May 2): Maybank Kim Eng Research continues to rate Mapletree Logistics Trust (MLT) at “hold” at an unchanged price target of $1.20.
The DDM-based valuation on the research house’s target price for MLT includes a risk-free rate of 2.5% and a market risk premium of 6.5% against beta assumptions.
This comes even as MLT’s 4Q17 distribution per unit (DPU) of 1.86 cents, which was posted last week on Thursday, rose 3% compared to the previous year and brings the trust’s FY17 DPU to 7.44 cents, which is in line with Maybank’s expectations.
(See also: Mapletree Logistics Trust announces 3% rise in 4Q DPU to 1.86 cents)
“The better performance in 4Q17 was attributed to a stabilisation of converted single user assets (SUAs), higher rentals on existing assets, contributions from asset enhancement initiatives (AEIs), and accretive acquisitions. These partly offset lower transitory occupancies in Singapore and South Korea, redevelopment properties, and divestments,” recalls analyst Chua Su Tye in a Tuesday note.
Chua however brings attention to MLT’s “stretched balance sheet profile”, noting a sharp drop in cap rates for the trust’s portfolio, which was largely due to a change in valuers which is now disclosed on a net basis as compared to gross previously.
“We expect net property income (NPI) margins to stabilise during FY18-19F. Acquisitions should stay in focus for MLT, with management hinting at third-party assets in Australia and South Korean, and from its sponsor in Hong Kong,” says the analyst.
“Looking ahead, we see further push in [MLT’s] acquisition-led growth, but logistics oversupply remains a key drag on organic fundamentals,” he concludes.
Maybank continues to prefer business parks within the Singapore industrial REITs space given strong demand-supply dynamics, and hence reiterates Ascendas REIT (AREIT) as its top sector “buy” pick with a target price of $2.85.
As at 12:18pm, units of MLT and AREIT are trading at $1.12 and $2.55 respectively.
