SINGAPORE (July 25): DBS is remaining vested in Mapletree Logistics Trust (MLT) despite the recent rise in its share price.
This is because the REIT offers investors diversified but rising exposure to growth in the Asia-Pacific’s logistics sector.
In a Tuesday report, analyst Derek Tan expects MLT to remain on a growth path, with the manager scouting for opportunities across its main markets.
“We see brighter prospects in MLT’s major markets of Hong Kong, China and Australia, and the group is poised to reverse its downward trend in DPU seen in the past two years,” says Tan.
The brokerage house is maintaining its “buy” call and target price of $1.28.
1Q18 was another strong quarter with DPU up 2% y-o-y as MLT kept up the positive growth momentum from a quarter ago.
“We continue to believe that earnings is bottoming out and the Singapore warehouse sub-sector will be approaching a cyclical bottom by the end of 2017, when new supply will fall off significantly after that,” says Tan who expects acquisitions to be a key catalyst for consensus to re-rate earnings.
DBS is assuming $200 million, 50% which will be funded by equity, to be set aside for acqusitions.
In addition, with the first call date for its 5.375% perpetual in September, Tan believes that MLT can refinance with a new perpetual at a lower coupon rate, resulting in potential savings.
Units of MLT are trading 1 cent higher at $1.24.
