SINGAPORE (Aug 15): DBS continues to rate Mapletree Logistics Trust (MLT) a “buy” with a target price of $1.28 given the trust is divesting its assets to build up cash reserves for more investments.
MLT acquired 7 Tai Seng Drive in 2006 for $38 million and as at March, the industrial property is valued at $31.8 million.
Due to the limited scope of redevelopment into a modern warehouse facility, the management is considering the sale of the property.
In a Tuesday report, analyst Derek Tan says, “While the premium achieved by MLT is significant when compared to the selling price, we note that the property is located within the prime Paya Lebar iPark which has in recent years transformed into a thriving industrial community with a number of high-specification properties nearby.”
The analyst believes that the property could be redeveloped into an industrial high-specification property.
The sale of this property is still subject to approval from JTC and is expected to complete in 4Q17.
In addition, MLT is selling 4 Toh Tuck Link, a four-storey cargo-lift warehouse.
This development was acquired in 2006 for $11 million and was last valued at $14 million.
With a gross floor area (GFA) of 8,641 sqm and currently 60% occupied, the manager believes that the current plot ratio of 1.5x is close to the maximum plot ratio of 1.6x, thus offers limited scope to increase GFA to build into a modern logistics facility.
“The purchaser is an unrelated third party, Venus Beauty Pte Ltd, which we believe to be an end-user,” says Tan.
The analyst likes the manager’s proactive approach towards reviewing the properties’ relevance in today’s changing needs.
The total sales of about $82 million can be redeployed, while the estimated net gains of $38 million on 7 Tai Seng Drive will be paid out to unitholders over time after completion of the deal.
“This provides the manager with additional buffer to smoothen out its earnings profile in the midst of volatility in the medium term,” mentions Tan.
With close to about $247 million worth of properties sold over the past two months, the manager will be able to redeploy capital to other acquisition targets.
Units in MLT are trading at $1.19 as at 10.10am.
