MLT – CIMB

Expect one but ended with two

MLT announced that the acquisition of MZLP was completed today.Surprisingly, the acquisition of the previously speculated MYBLP was also completed today at a purchase consideration of S$42.8m. Given the 100% occupancy in both properties, the acquisitions of which were funded via debt, they are expected to boost DPU cumulatively by c.1.4%. Consequently, we upgrade MLT from Hold to Add, with a slightly higher DDM-based (discount rate: 8.0%) TP of S$1.24, as we tweak our FY15-16 DPS estimates upward by c.1.9% while anticipating more acquisitions to come through in the mid-term.

What Happened

Mapletree Logistics Trusts (MLT) today announced that it has entered into two separate sale and purchase agreements with its sponsor for the acquisitions of: 1) Mapletree Yangshan Bonded Logistics Park (MYBLP) for a purchase consideration of Rmb197.2m (S$41.1m), and 2) Mapletree Zhengzhou Logistics Park (MZLP) for a purchase consideration of Rmb205.6m (S$42.8m).

What We Think

The acquisition of MZLP has been highlighted previously on 21 July 14 and as such, this transaction has already been factored into our model. However, the acquisition of MYBLP, though previously speculated, was only confirmed today. MYBLP is a grade-A logistics facility with a GFA of 46,000 sq m comprising two blocks of single-storey warehouses with mezzanine offices. Currently, this facility is fully leased to two international 3PLs – Ocean East Logistics of the Maersk group and Air Sea Transport, with a weighted average lease term to expiry of 2.1 years. Both acquisitions were completed today. MYBLP is expected to achieve an NPI yield of 7.5% (slightly lower than the 8.0% yield projected for MZLP). Based on our estimates, MYBLP will be mildly yield accretive, boosting DPU by c.0.6%. With the two acquisitions, DPU is expected to rise by c.1.4% while leverage ratio will rise to c.35.3% (from 34.5%).

What You Should Do

Despite the tight market for good quality assets, we believe MLT will continue to expand via future acquisitions. After all, its sponsor still has sizeable logistics developments yet to be injected into the trust. On this basis, coupled with a slightly higher DPU forecast as a result of these acquisitions, we upgrade our rating to Add, with a slightly higher TP of S$1.24. Currently, MLT offers a FY15/FY16 dividend yield of 6.9%/7.1% – a level we do not consider demanding.