MLT – DBS

Attractive yields

At a Glance

• In line with ours, above consensus
• Stable portfolio occupancies
• Maintain BUY, TP S$0.83, offering a total return of 18% backed by stable FY09-10F DPU yields of 8%.

Comment on Results

Stable 3Q09. Mapletree Logistics Trust (MLT) reported 3Q09 results that were in line with expectations. Gross revenues and net property income (NPI) increased by 10.3% and 9.5% to S$50.8m and 44.1m respectively, as a result of a larger portfolio. Distributable income came in at 28.8m (+13% yoy), translating to a DPU of 1.48 Scts. On a q-o-q basis, performance remained stable.

Occupancy levels at 97%. Occupancy levels held up pretty well, which were slightly above our estimates of 96%. Looking ahead, with only 4% of their revenues up for renewal in 2H09, we expect occupancy levels to remain stable – we have tweaked our occupancy assumptions for FY09 slightly upwards, which increase our FY09-10F DPU estimates slightly 2%.

Selectively acquisition. The manager of MLT emphasizes that while they are considering potential targets, they will only likely go ahead with the acquisitions, only if they are accretive and value enhancing to the portfolio. Also, these acquisitions should not be overleveraging its balance sheet, which, in our view, is reassuring to investors of management’s cautious and prudent approach towards growing its portfolio.

Recommendation

Buy for stable yields, TP S$0.83. We believe that MLT, trading at 0.8x P/BV, offering with a prospective forward FY09-10F DPU yield of 7.8% remains attractive. Maintain BUY, TP S$0.83 on the on the back of higher earnings estimates and lower WACC of 6.6% compared to 7%. Upside surprises will stem from MLT acquiring properties from market/sponsor.