MLT – CIMB

More inorganic growth expected

MLT’s 1HFY3/15 results are in line with our estimate, with 1H DPU accounting for 49% of our full-year estimate. With future occupancy for the Singapore portfolio expected to dip slightly as MLT converts more of its properties from single-tenanted buildings to multi-tenanted buildings and with only 8.8% of NLA left to be renewed, MLT is expected to grow through acquisition of quality assets from its sponsor. We maintain our Add rating, with our DDM-based (discount rate: 8.0%) target price rising to S$1.31 as we adjust our model slightly and roll over our forecast to the following year.

Stable quarter

Mapletree Logistic Trust’s (MLT) 2QFY15 results are in line with our expectations, with both revenue and DPU for the quarter accounting for 24% of our full year’s forecast. The slightly higher revenue came mainly from i) stronger contribution from Mapletree Benoi Logistics Hub, ii) positive rental reversions of 9%, mainly in Hong Kong, Malaysia and Singapore and iii) additional contribution from the Daehwa Logistic Centre in South Korea and Flex Hub in Malaysia in 1H. Occupancy remained stable at 97.2% (vs. 97.6% in 1QFY15).

Recent acquisitions to contribute to earnings in 3QFY15

MLT recently announced the acquisition of i) Mapletree Yangshan Bonded Logistics Park (MYBLP), and ii) Mapletree Zhengzhou Logistics Park (MZLP) for Rmb402.8m (S$83.9m) in total. With occupancy of 100% in both properties and NPI yield of 8.0% and 7.5%, respectively, these acquisitions are expected to start contributing to earnings in 3QFY15. DPU is expected to grow by c.1.4% from these acquisitions while the leverage ratio based on our estimate is expected to rise to c.35.3% from 33.3% at end-Sep 14.

Maintain Add

With only 8.8% of NLA due to be renewed for the rest of FY15, MLT is expected to grow mainly through acquisition in the coming quarters. Given the large pipeline of assets (c.2m sq m of GFA) spread across China, Hong Kong, Malaysia and Vietnam that could be injected into the REIT in the mid- to long-term, we believe MLT could continue to expand in the coming years. On this basis, we maintain our Add rating with a slightly higher target price of S$1.31 as we roll over our earnings forecast to the following year.