Category: MLT
REITs (Japan Assets) – BT
S’pore Reit buildings in Japan get away lightly
The damage unleashed by the earthquake and tsunami on the north-eastern coast of Japan has left most of the properties owned by Mapletree Logistics Trust, Parkway Life Real Estate Investment Trust (Reit) and Global Logistic Properties (GLP) relatively unscathed.
Mapletree Logistics Trust said yesterday that 13 out of its 14 properties in Japan ‘escaped with either no damage or minimal damage’. Its remaining property in Sendai – where devastation has been greatest – Sendai Centre, has been affected by the tsunami, the trust said.
The latest valuation has put the cost of reinstating the building at about 600 million yen, or about S$9 million. The trust’s manager, however, does not expect the cost of repairs to amount to that much.
‘Preliminary report suggests that the building is intact. However, the affected area has been cordoned off by the local authorities due to safety measures. The full extent of damage can only be ascertained when access into the property is allowed,’ the trust said in a filing on the Singapore Exchange yesterday.
Sendai Centre is the second smallest of the trust’s properties in Japan by revenue contribution, accounting for 0.7 per cent of its portfolio’s total gross revenue.
On Friday night, GLP said that damage to its property had been estimated at about 3.9 billion yen or US$47.5 million, with the likely loss of rental income coming up to 0.89 billion yen or US$10.8 million. In total, this accounts for less than one per cent of GLP’s US$6.3 billion portfolio of properties in Japan. The majority of the repairs to its properties will take place in the next 30 days.
‘The low level of losses are testimony to the quality of our portfolio and property management as well as the rapid response of our dedicated team in Japan,’ said Jeffrey Schwartz, deputy chairman of GLP, who had been visiting the operations in Japan when the earthquake took place.
Parkway Life Reit, which has 29 properties in Japan, said that none of them have been structurally affected. ‘In addition, none of our properties are located within the evacuation zones of the nuclear plants in Fukushima Prefecture, with our nearest property to the nuclear plant site at least 200 kilometres away,’ it said yesterday.
Saizen Reit, a firm with 22 properties in Sendai alone, said on Friday night that its manager, Japan Residential Assets Manager Limited, and asset manager, KK Tenyu Asset Management, were contacting local property managers to assess the extent of the impact, but that it was being hampered by ‘breakdown of telecommunications networks and power blackouts’.
The collective value of its properties in the three affected areas – Sendai, Koriyama and Morioka – stand at 5.88 billion yen, accounting for 15.5 per cent of its total portfolio value.
Mapletree Logistics Trust, Parkway Life Reit and GLP have said that all their staff in Japan are safe and accounted for.
MLT – DBSV
Portfolio to grow
• Ends 2010 on a strong note with 4Q10 DPU of 1.55 Scts
• Acquisition growth remains the main driver in 2011, raising acquisition assumptions to S$300m
• BUY, revised TP to S$1.07 offering total return of 16%.
Strong DPU of 1.55 Scts expected. Topline and net property income were higher at S$61.0m (+20% yoy, +12% qoq) and S$53.8m (+22%yoy, +13% qoq), mainly due to new asset contributions towards 2H10, while underlying portfolio remained resilient. Distributable income came in at S$36.8m (+28%yoy), aided by interest savings from lower interest environment (average cost of debt fell to 2.2% vs 2.8% a year ago). The trust also recorded a slight revaluation gain of S$18.9m and NAV remained stable at S$0.85 per share.
Healthy occupancy of 98%; leasing demand remains strong. Portfolio occupancy remains at a high of 98%, with Malaysia seeing sequentially higher occupancy, which increased by 5%. Looking ahead into 2011, 16.6% of its revenues will be up for renewal (the majority are derived from its Singapore and HK operations). We believe the manager should deliver positive rental reversions into 2011 (forecasting average 3% for portfolio in 2011).
Expect target acquisitions to be yield accretive. Backed by sponsor’s visible development pipeline while considering 3rd party opportunities, we believe MLT remains in a sweet spot to deliver higher value – trading at implied FY11 yield of 6.5% means that target acquisitions; if executed, should be accretive. We have now assumed S$300m (doubled from previous S$150m) worth of acquisitions in 2011, to be funded on a 35-65% debt-equity ratio.
BUY, DCF-based TP raised to S$1.07. Trading at 1.2x P/BV, we believe the market is pricing in acquisition growth, which we are comfortable, given its execution track record. MLT offers a growing FY11-12 yield of 6.6-6.8%.
MLT – OCBC
Stellar 4Q10 results by our 2011 top S-REITs pick
Stellar 4Q10 results. Mapletree Logistics Trust (MLT) reported a set of stellar 4Q10 results last evening, with mostly double-digit growth figures. 4Q10 gross revenue of S$61m was up 20.1% YoY and 11.9% QoQ. Net property income of S$53.8m rose 19.8% YoY and 13.0% QoQ. Distributable income of S$36.8m was up 15.8% YoY and 16.9% QoQ. Its results were boosted by positive contributions from recent acquisitions, lower vacancy rates and further positive rental reversions across MLT’s portfolio. As at 31 Dec 2010, MLT recorded portfolio occupancy of 98%. 4Q 2010 also saw a further increase in the occupancy rate of Malaysia from approximately 95% to 99%.
Most prolific industrial REIT acquirer. For FY 2010, MapletreeLog continued to focus on acquiring yield accretive assets that complement its portfolio. During the year, MapletreeLog completed 14 acquisitions in Singapore, Japan, South Korea and Vietnam. It now has 96 properties, comprising 54 properties in Singapore, eight in Hong Kong, six in China, 11 in Malaysia, 14 in Japan, two in South Korea and one in Vietnam. The diversification in terms of geography and customer mix further adds stability and resilience to the portfolio. These acquisitions are yield accretive with NPI yields ranging from 7% to 10%. Singapore, Hong Kong and Japan remained the key contributors to the portfolio, contributing close to 90% of MLT’s NPI.
Still compelling. In line with our OVERWEIGHT rating for the Industrial REITs subsector, we think MLT will continue to ride on Asia’s recovery cycle and benefit from positive rental reversions in FY11-FY12. Asia is expected to lead the industrial recovery due to increasing trade flows and domestic consumption in China (+Hong Kong) and Vietnam, which constitute 25% of MLT’s NPI. MLT has a proven track record in executing a virtuous cycle of accretive acquisitions and competitive fund-raising. Going forward, MLT is seeking to capitalise on the growth potential of the Middle East, India and Indonesia through acquisitions and working with the Sponsor in greenfield developments. Mapletree Investments and Itochu also plan to develop logistics built-to-suit projects of approximately US$300-500m over the next 3-5 years, which will be offered to MLT on a right-of-first refusal basis, further providing MLT with a pipeline of potential assets for future acquisitions. The manager also believes that a significant portion of the future growth will come from its repeat customers; and will continue to invest in and expand customer relationship and cater to their real estate needs throughout Asia. Currently, repeat customers account for 25% MLT’s gross revenue. Maintain BUY with an increased RNAV-derived fair value of S$1.03 (prev: S$1.00; total return of 11.42%).
MLT – BT
MapletreeLog eyes Mid-East, India, Indonesia
MAPLETREE Logistics Trust (MapletreeLog) is keen to venture into new markets – the Middle East, India and Indonesia – after a busy year of acquisitions.
The industrial real estate investment trust shared these plans yesterday as it posted higher earnings for the fourth quarter ended Dec 31, 2010.
Gross revenue in Q4 was $61 million, rising 20 per cent year-on-year with the help of contributions from 14 properties purchased in the past year.
Net property income grew 20 per cent to $53.8 million, driving total amount distributable to unitholders up 16 per cent to $36.8 million.
Distribution per unit (DPU) in Q4 was 1.55 cents, down from 1.59 cents a year ago. The latter was boosted by a one-time consideration from Prima Limited to extend its leases at a property. Excluding this one-time payment, the DPU in Q4 2009 would have been 1.48 cents, translating to a year-on-year growth in Q4 2010.
MapletreeLog had 96 properties spread across Singapore, Hong Kong, Japan, China, Malaysia, South Korea and Vietnam as at Dec 31. The total book value was $3.5 billion.
Its portfolio has grown with asset purchases. The Reit started the financial year with 82 properties, carrying a book value of $2.9 billion.
MapletreeLog intends to ‘capitalise on the growth potential of the Middle East, India and Indonesia through acquisitions’, said Richard Lai, CEO of the Reit manager. It also has plans to work with its sponsor Mapletree Investments on greenfield developments.
For the full year ended Dec 31, MapletreeLog reported a net property income of $193 million, up 7 per cent from the previous year.
Total amount distributable to unitholders was $130.1 million, rising 10 per cent. DPU for the year was 6.09 cents, higher than the 6.02 cents a year ago.
MapletreeLog’s aggregate leverage as at Dec 31 was 37.7 per cent, dipping from 39.9 per cent a quarter ago. Its target leverage for the medium term is 40-50 per cent.
The weighted average occupancy rate across its portfolio at Dec 31 was about 98 per cent, unchanged from a quarter ago. Shares of MapletreeLog lost half a cent yesterday to close at 98 cents.
Singapore Reits – DBS
The quest for growth
• S-REITs offer FY11 yields of 6.1%, an attractive 340 bps spread against long bonds
• As inflation inches higher, we prefer SREITs with ability to continue delivering strong organic growth
• Strong balance sheets to leverage on in the chase for further acquisitions
• BUY FCT, P-Life, Cache, MLT, CDL HT, ART, CMT
Normalized FY11F yield of 6.1%. The S-REIT sector now trades at a normalized FY11F distribution yield of c6.1%, slightly below its historical mean of c6.5%. Spreads have narrowed but still remain attractive at c340bps above the long-term government bond yield, currently at c2.7%.
The quest for DPU growth. S-REITs offer a good hedge against inflation given that earnings growth can potentially outpace inflation, which is expected to inch higher to 3.2% in 2011. We prefer S-REITs with the ability to deliver growing distributions organically while having the opportunity to acquire accretively. We continue to hold the view that hospitality and retail sectors offer a more robust outlook on the back of expected strong visitor arrivals in 2011. Office REITs are expected to see topline pressure from negative reversions in 2011 though the sector is on an uptrend.
Interest rate hikes to have minimal impact on distributable income. Given the current low interest rate environment, S-REITs have taken the opportunity to refinance, lengthen the debt maturity profile as well as widen their sources of debt, hence enjoying savings in interest. DBS economist expects interest rate hikes only towards the end of 2011. Even then, our scenario analysis reveals that the impact on S-REITs FY11 distributable income is limited to -0.2 to -3.0% as majority of the S-REITs have hedged/fixed their interest rate positions.
Industrial & Sponsored REITs have potential for further accretive acquisitions. Even after acquiring cS$6bn of assets YTD, S-REIT sector gearing remains low at 34.4%. Further growth from acquisitions is possible and we look towards the industrial REITs for their ability to acquire earnings accretive assets given the relative higher yields of industrial assets while sponsored REITs continue to offer long-term portfolio growth visibility to investors from potential asset injections in the medium term.
Stock picks. CMT, FCT, CDL HT and Ascott REIT are expected to deliver strong organic growth potential coupled with sponsor injection possibilities. P-Life offers downside protection as revenue is pegged to inflation. MLT and Cache offer potential earnings surprise given their visible sponsor pipeline.