SINGAPORE (Mar 7): OCBC Investment Research is maintaining “buy” on Mapletree Logistics Trust (MLT) while raising its fair value estimate to $1.50 from $1.40 to assume lower cost of equity (COE).
This comes as the research house rolls forward its valuations while ascribing a COE of 7.5% in light of a more conducive interest rate environment, offset in part by a lower terminal growth rate assumption of 2%.
In a Thursday report, analyst Andy Wong highlights MLT as the third-best performing Singapore REIT (S-REIT) in the year to date (YTD) with superior total returns of 14.4%, exceeding the total returns YTD generated by FTSE ST REIT Index and STI of 10.2% and 5.2%, respectively.
The analyst says he continues to like the REIT for its resilient portfolio, strong management team, and potential for further capital recycling activities to unlock value for unitholders.
In particular, Wong believes Australia’s logistics sector, which contributes to 8.3% of MLT’s property asset value as at end-2018, remains bright despite concerns over headwinds surrounding Australia’s economic growth.
“Fundamentals of the logistics sector [in Australia] remain largely healthy, in our view… This is corroborated by the recent earnings call updates by a number of major local players within this space,” explains the analyst.
Examples include Stockland’s expansion of its logistics segment over the past six years; GPT Group’s reported strong leasing momentum and confidence in demand for “well-located facilities; and Goodman Group’s CEO positive sentiment on the logistics sector being driven by the global structural change in e-commerce.
“Property consultant CBRE also opined that Australia’s e- commerce industry will inject 350k sq m of additional new supply into Australia’s industrial and logistics space market from 2019 to 2022. As more firms aim for same-day delivery, there would be a surge in demand for logistics spaces in prime locations near consumers,” says Wong.
As at 1.14pm, units in MLT are trading flat at $1.42, implying a FY19F DPU yield of 5.6%.
