MLT – BT

MapletreeLog prefers natural hedging

GIVEN the strength of the Singapore dollar, investors of Mapletree Logistics Trust (MLT) were keen to know more about its currency hedging policy, says Citigroup after hosting MLT on a non-deal road show in Europe.

‘Natural hedging remains its (MLT’s) preferred hedging strategy with local currency loans set up to offset currency fluctuations,’ commented Wendy Koh from Citigroup.

Ms Koh added that MLT has also hedged its exposure to the Hong Kong dollar, Japanese yen, Malaysian ringgit, and Korean won, resulting in 89 per cent of its amount distributable being hedged for FY2011. Other aspects that drew investors’ attention also included the impact of Japan’s recent earthquake on MLT assets.

Notably, only one of MLT’s 15 properties in Japan was damaged by the earthquake. With regard to the costs required to rectify the damaged property, the logistics real estate investment trust (Reit) guided that it should come in at about $3 million as opposed to the $9 million previously estimated.

On a more macro level, things have been looking good for the Reit as demand for logistics space has been robust, especially in Singapore and Hong Kong as occupancy rates improve.

In addition, rental reversions came in higher, up 5 per cent versus one to 2 per cent in the past.

With regard to future plans, MLT highlighted that it intends to adopt an acquisition strategy to focus on yield optimisation and growth. To jump-start this strategy, MLT’s lower yield assets are being divested to fund acquisitions of properties which generate higher returns.

Asset enhancement initiatives also seem to be on MLT’s cards as management continues to evaluate and identify properties for such purposes.

Citigroup currently has a ‘buy’ recommendation on MLT with a target price of $1.00. Yesterday the stock closed one cent higher at 91 cents.