MLT – OCBC

1Q11 DPU of 1.55 S-cents. Not stellar but stable results

1Q11 DPU of 1.55 S-cents. Mapletree Logistics Trust (MLT) reported a set of stable results on Thursday. 1Q11 gross revenue of S$62.2m was up 21.1% YoY and 2% QoQ. The yearly increase was mainly due to contributions from the 14 properties acquired in Singapore, Japan, Korea and Vietnam last year. The two acquisitions announced in Mar 2011 were only completed towards the end of 1Q11 and as such, the full effect of the income contributions will only be reflected from 2Q11. 1Q11 revenue was slightly below our expectation but within Bloomberg consensus. 1Q11 revenue met 22.3% of our full-year forecast and 23.8% of consensus FY11 revenue. Distributable income of S$37.5m was up 21.7% YoY and 1.9% QoQ. 1Q11 DPU is 1.55 S-cents, which is up 3.33% YoY but flat QoQ; this represents an annualized yield of 6.9%.

Portfolio Performance. As at 31 Mar 2011, MLT recorded portfolio occupancy of 98.3%, compared with 98.0% in 4Q10, boosted largely by Singapore, Hong Kong and China. However,1Q11 saw the occupancy rate of Malaysia fall from 99.2% to 96.3%. Meanwhile, a total of 81,500 sqm of space had been renewed or replaced, and this accounts for approximately 94% of the total NLA that was due for renewal in 1Q11. The weighted average lease term to expiry for the portfolio is about 6 years with approximately 70% of the leases expiring in 2014 and beyond. MLT also undertook a S$4m enhancement on Multi-Q Centre in South Korea, with the addition of a 3-storey warehouse next to the existing building, thereby increasing total gross floor area by 4,100 sqm. MLT has also identified another Singapore property with underutilized plot ratios and outdated specifications for redevelopment. It is currently firming up the preparations, which will increase the GFA by more than 70,000 sqm. MLT will make the announcement, likely by next month.

Further Acquisitions. MLT adds that it is actively looking at acquiring a warehouse (60,000 sqm and 98% leased) in Malaysia from its sponsor. MLT should be able to complete the acquisition by this year. Going forward, its main acquisition focus will be in Singapore, Malaysia and South Korea, but MLT remains cautiously optimistic on the outlook in Asia. MLT also believes that a significant portion of the future growth will come from its repeat customers. Currently, repeat customers account for 28% MLT’s gross revenue. Reiterate BUY with a reduced RNAV-derived fair value of S$1.00 (prev: S$1.03) on grounds of dampening prospects in Japan (constituted 23.3% of 1Q11 gross revenue.