UOB Kay Hian has added Mapletree Logistics Trust (MLT) to its alpha picks portfolio for the first month of the year.
“For January 2023, we add MLT to our portfolio as we expect medium-term positive sentiment on the stock to drive its share price as the removal of China’s zero-Covid regulations should positively affect the company’s assets,” write UOB Kay Hian’s team of analysts in their Jan 3 report.
“We like MLT’s exposure to the China reopening story as its China and Hong Kong portfolio constituted 21% and 23% of its portfolio valuation respectively as at end-3QFY2022,” they add.
The analysts have also cut losses on Lendlease REIT (LREIT), which they say appears to lack share-price catalysts in the near term.
The team’s alpha picks portfolio outperformed the benchmark Straits Times Index (STI) in 4Q2022 and 2022, gaining 5.5% and 8.1% on a market-cap weighted basis vs the STI’s
3.9% and 4.1% gain respectively.
For December 2022, UOB Kay Hian’s portfolio rose 1.6% on an equal-weighted basis which beat the STI’s 1.2% decline. Outperformance for the month was mainly derived from CapitaLand Investment, Genting Singapore and Thai Beverage (ThaiBev), which grew by 11.1%, 8.5% and 7.9% m-o-m respectively.
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On the other hand, the main underperformers were Singtel (-5.5%), Keppel Corporation (-3.7%) and DBS (-3.6%) which fell by 5.5%, 3.7% and 3.6% m-o-m respectively.
“The STI’s decline in December mirrored the overall bearish tone in global markets as worries about a potential recession in major developed economies, as well as continued hawkish statements from the US Fed, weighed on sentiment,” write the analysts.
“While the continued easing of China’s Covid-19 restrictions lifted hopes for a timely boost to Asia’s regional economic outlook, worries have surfaced regarding the potential ‘export’ of new Covid-19 variants to the region and its negative ramifications,” they add.
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‘Buy’ MLT
Analyst Jonathan Koh is reiterating “buy” for MLT, citing a resilient balance sheet with low aggregate leverage of 37% and long weight average debt maturity of 3.6 years. He says that MLT benefits from the reopening of the economies in Mainland China and Hong Kong, which accounted for 44% of its portfolio valuation as of September 2022.
Koh’s target price for MLT of $1.87 is based on dividend discount model (DDM) with a 7.25% cost of equity and terminal growth of 2.8%.
As at 3.51pm, the STI was 5.59 points or 0.17% down at 3,245.73 points and shares in MLT were trading flat at $1.59.
