MLT – CIMB

Another stable quarter

MLT’s 3QFY14 results were in line with consensus and our expectations, with this quarter’s DPU accounting for 26% of our full-year forecast and 9MFY14 for 76%. Revenue for the quarter grew 1% yoy, mainly a result of the weakening of the yen. During FY13/14, MLT hedged/derived more than 95% of its distributable income in SG$. We maintain our Hold rating with an unchanged DDM-based (discount rate: 8.1%) target price of S$1.11, as the REIT continues to seek opportunities to boost its earnings.

Growth softened by weak yen

Mapletree Logistics Trust (MLT) reported its 3QFY14 results, with revenue coming in at S$78.1m (+0.9% yoy) and DPU at S$1.82 (+5.5% yoy). The feeble revenue growth was mainly attributed to the weaker yen. Excluding forex losses, gross revenue would have increased by S$3.7m (+5.0% yoy) due to positive rental reversions in Singapore and Hong Kong and additional income from the acquisition of Box Centre in South Korea (acquired in Jul 2013) and Mapletree WuXi Logistics Park in China (acquired in Jan 2013). Lower borrowing costs (-23% yoy) mitigated the weakness in the JPY.

Depend on development projects for growth

Although rental reversion was impressive, posting an average of 23% during the quarter, a large part of it was the result of converting two single-user assets to multi-tenanted buildings. Excluding these assets, rental reversion would be at 13% instead. Looking ahead, with 8.1% of NLA to be renewed in FY13/14 and 16.2% in FY14/15, we expect rental reversion to have a minimal impact on MLT’s growth. Instead we expect its DPU to grow by 4.9% next year as a result of the recent completion of the redevelopment project at Mapletree Benoi Logistics Hub (100% pre-committed) and the recently announced S$34.3m acquisition in Iskandar.

Maintain Hold

Although poised to grow in FY14/15, we believe the positivity of MLT may be dampened by the continual weakness in the yen. We maintain Hold with unchanged DDM-based target price of S$1.11 as we wait for more impactful acquisitions/redevelopments.