SINGAPORE (Apr 8): DBS Group Research is upgrading its recommendation for Mapletree Logistics Trust (MLT) to “buy”, even as Singapore enters into a month-long “circuit breaker” to help curb the spread of the Covid-19 outbreak.
“We remain comfortable that MLT’s pure logistics exposure is least impacted by the Covid-19 outbreak,” says lead analyst Derek Tan in an April 8 report.
Tan notes that the logistics sector is “less impacted” by Singapore’s circuit breaker measures, which will see the closure of most workspaces until at least May 4.
“[This] will imply that its earnings profile will remain more stable than peers,” Tan says. “We see value emerging for Mapletree Logistics Trust after its recent share price correction, bringing valuations to a more palatable 1.3x P/NAV, [with] yield of 5.2%.”
The way Tan sees it, supply chain disruption in the region due to Covid-19 has only affected “a small select group” of MLT’s tenants in Singapore, China and Hong Kong.
“While we anticipate some rent relief to tenants, the gradual relaxation of restrictions in China implies that the initial worries of a widespread rebate is unlikely to materialise,” Tan says. “The overall impact is understood to be minimal.”
Meanwhile, Tan is excited about the acquisition prospects available to MLT from the sponsor. “We see a sizeable and growing pipeline of development properties which are approaching maturity that could be injected in the medium term,” he says.
However, in light of the current situation, the analyst says any acquisition is now likely to be pushed back to near the end of FY2021.
On the back of assumptions of slower acquisition and negative reversions in Singapore and Hong Kong, Tan is revising his earnings estimates downwards by around 4%.
He is also lowering the target price for MLT to $1.85, from $1.90 previously.
“We remain optimistic on MLT’s ability to drive growth through acquisitions,” Tan says.
As at 11.52am, units in MLT are trading 3 cents lower, or down 1.8%, at $1.60.
