22 October 2014
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Needs More Injections From Sponsor

Mapletree’s 2Q15/1H15 distribution per unit (DPU) rose 3.3%/4.4% YoY to 1.88/3.78 cents, or at 25/51% of our full-year forecast. In Singapore, the leasing environment has become more challenging due to tighter regulations on the use of industrial space, such as recent changes that were made to JTC Corp’s subletting policy. Without further sponsor injections, we believe its growth prospects are unexciting. Assume

coverage with NEUTRAL and a SGD1.22 DDM-based TP (1.7% upside).

  • 2QFY15/1HFY15 (Mar) results in line. Mapletree Logistics Trust (Mapletree) posted a 3.3%/4.4% YoY rise in 2QFY15/1HFY15 DPU, meeting 25%/51% of our full-year estimate, aided by contributions from Mapletree Benoi Logistics Hub and 9% positive rental reversions mainly from Hong Kong, Singapore and Malaysia. The REIT has about 8.8% of its leases (in terms of net leasable area (NLA)) due for renewal for the rest of FY15. The all-in-financing cost for 2QFY15 remained unchanged QoQ at 2.0%, with an average term of debt of 3.3 years (1QFY15: 3.4 years). According to its interest rate sensitivity analysis, its DPU would decline by ~0.5%, or 0.009 SG cents each quarter as a result of a 25bps increase in interest rates.
  • Portfolio remains robust. Its portfolio occupancy rate stayed healthy at 97.2%, with some downtime due to the conversion of single-user assets to multi-tenanted buildings. Leasing activities remained stable in most of Mapletree’s markets, with some weakness in China – although this was offset by stronger performances in Singapore and HK. We note that reversions have also slowed to 9% last quarter from a high of 24% a year ago. Net property income margins are also on the decline, dropping to 84.2% in 2QFY15 from 86.4% in 2QFY14.
  • Rekindling its growth engine. We forecast that Mapletree’s DPU could grow at an unexciting CAGR of 1.4% over FY14-17F. This, however, could be boosted by further asset injections by its sponsor, which has 17 more sizeable logistics developments in Asia, representing more than half of the total NLA in its portfolio of properties. Until then, we assume coverage with a NEUTRAL. Our DDM-derived TP of SGD1.22 (CoE: 7.1%, TG: 1%) implies a 1.7% upside from its current share price.


22 October 2014
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More inorganic growth expected

MLT’s 1HFY3/15 results are in line with our estimate, with 1H DPU accounting for 49% of our full-year estimate. With future occupancy for the Singapore portfolio expected to dip slightly as MLT converts more of its properties from single-tenanted buildings to multi-tenanted buildings and with only 8.8% of NLA left to be renewed, MLT is expected to grow through acquisition of quality assets from its sponsor. We maintain our Add rating, with our DDM-based (discount rate: 8.0%) target price rising to S$1.31 as we adjust our model slightly and roll over our forecast to the following year.

Stable quarter

Mapletree Logistic Trust’s (MLT) 2QFY15 results are in line with our expectations, with both revenue and DPU for the quarter accounting for 24% of our full year’s forecast. The slightly higher revenue came mainly from i) stronger contribution from Mapletree Benoi Logistics Hub, ii) positive rental reversions of 9%, mainly in Hong Kong, Malaysia and Singapore and iii) additional contribution from the Daehwa Logistic Centre in South Korea and Flex Hub in Malaysia in 1H. Occupancy remained stable at 97.2% (vs. 97.6% in 1QFY15).

Recent acquisitions to contribute to earnings in 3QFY15

MLT recently announced the acquisition of i) Mapletree Yangshan Bonded Logistics Park (MYBLP), and ii) Mapletree Zhengzhou Logistics Park (MZLP) for Rmb402.8m (S$83.9m) in total. With occupancy of 100% in both properties and NPI yield of 8.0% and 7.5%, respectively, these acquisitions are expected to start contributing to earnings in 3QFY15. DPU is expected to grow by c.1.4% from these acquisitions while the leverage ratio based on our estimate is expected to rise to c.35.3% from 33.3% at end-Sep 14.

Maintain Add

With only 8.8% of NLA due to be renewed for the rest of FY15, MLT is expected to grow mainly through acquisition in the coming quarters. Given the large pipeline of assets (c.2m sq m of GFA) spread across China, Hong Kong, Malaysia and Vietnam that could be injected into the REIT in the mid- to long-term, we believe MLT could continue to expand in the coming years. On this basis, we maintain our Add rating with a slightly higher target price of S$1.31 as we roll over our earnings forecast to the following year.


22 October 2014
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In a sweet spot

4Q and full-year results were in line, boosted largely by higher Singapore contributions on positive rental reversions and one month of higher ATP income. However, Australia was adversely affected by a weaker A$. Looking ahead, we retain our Add call given its strong organic growth profile. FY15 DPU is projected to expand by 12% yoy, with a direct flow-through of higher underlying rents at ATP to the trust’s topline. We estimate that this could expand its portfolio revenue by 7-8%. In addition, positive rental reversions and inbuilt rental escalations and rent reviews from its other local and offshore assets could provide another boost to earnings. We slightly raise our DDM-based target price to S$1.56.

Higher Singapore, lower Australia due to forex impact

FCOT saw a 9% increase in 4Q NPI to S$23.8m, thanks to higher contributions from Alexandra Technopark (ATP) and China Square Central (CSC). This offset a moderate performance in Australia, which was impacted by a weaker A$. Distribution income rose by 9% yoy to S$15m (DPU: 2.2 Scts). FCOT benefited from c.1 month of underlying higher rental income at ATP with the expiry of the master lease on 25 Aug 14. In addition, there were positive rental reversions of 18.4% at CSC and 15.3% at 55 Market St. The group also enjoyed a 0.7% uplift in its portfolio value, boosting its book value to S$1.59/unit.

Full year ATP lift in FY15

In FY15, FCOT should continue to benefit from a full 12 months’ of higher income from ATP as the underlying gross rent is higher than the master lease income. We estimate that the higher income from ATP could lift its portfolio topline by c.7-8% in FY15. In addition, the rising rental trend in Singapore should enable it to enjoy positive rental reversion at CSC and 55 Market St. as

the average expiring rents are lower than spot levels. This provides the trust with strong income visibility. Its Australian assets should continue to improve steadily, with fixed rent reviews and inbuilt rental escalation clauses.

Maintain an Add rating

We maintain our Add rating and continue to like FCOT for its strong and certain growth prospects, underpinned by an organic expansion within its existing portfolio. The trust is currently offering an FY15 DPU yield of 7.1%. We tweak our FY15 forecast marginally by 0.2% and lift our DDM-based target price to S$1.56.

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