MLT’s Q3 distributable income up 79%

The trust’s target is to have a portfolio worth at least $5b by 2010

MAPLETREE Logistics Trust (MLT) yesterday said its third quarter distributable income rose 78.9 per cent to $19.1 million – from $10.7 million a year ago – as revenue was boosted by contributions from 25 new properties the trust acquired during the year.

MLT’s distribution per unit (DPU) came to 1.72 cents, up 30.3 per cent from the DPU of 1.32 cents for the corresponding three months last year.

Net property income increased 76.1 per cent to $33.9 million from $19.2 million.

For the first nine months of the year, MLT’s distributable income rose 82 per cent to $52.1 million, while DPU climbed 32.7 per cent to 4.79 cents.

The trust’s asset base grew significantly over the last year, adding to its revenue, MLT said.

As at Sept 30, 2007, the trust’s portfolio had 61 properties, compared to 36 properties a year ago. These 61 properties have a book value of over $2.1 billion.

Another 13 property acquisitions worth some $295 million in all have also been announced and are pending completion.

‘For the current year-to-date, we have completed $687 million of acquisitions and have another $295 million of acquisitions that have been announced but are pending completion,’ said Chua Tiow Chye, chief executive of MLT’s manager.

‘This means that we have achieved 98 per cent of our $1 billion target for 2007.’

Once the pending acquisitions are completed, MLT’s portfolio would comprise 74 properties with a book value of about $2.4 billion. The trust’s target is to have a portfolio worth at least $5 billion by 2010.

Mr Chua added that MLT will probably buy the 254,000 sq ft Mapletree Logistics Centre in Vietnam from its sponsor Mapletree Investments by the end of this year.

The acquisition will mark the trust’s first foray into Vietnam. Right now, all of MLT’s properties are in Singapore, Malaysia, Japan, Hong Kong and China, but the trust has also identified Vietnam, India, South Korea, Taiwan and Thailand as attractive markets as it aims to have a more geographically diversified portfolio.

‘We hope that by this time next year, we will have some assets in Thailand and South Korea,’ said Richard Lai, deputy chief executive of MLT’s manager.

For the next financial year, more contributions from Japan, China and Malaysia are expected, MLT said.

MLT’s shares closed two cents up at $1.19 yesterday.

Acquisitions powered growth

• 3Q07 results in line. MLT’s 3Q07 DPU grew 30% yoy to 1.7cts, bringing YTD DPU to 4.7cts. This represents 75% of consensus and our forecast of 6.4cts for FY07.

• Acquisitions powered growth. Growth through acquisitions continued to power MLT’s growth (refer to our earlier report dated 24 Oct). As at 3Q07, MLT’s portfolio comprised 61 properties, up from 36 in 3Q06. In addition, there were 13 properties pending completion. As a result, revenue increased 12.7% qoq to S$38.5m. Net property income margins averaged 88% in the last four quarters, indicating relatively low property expense over revenue. Gearing was 54.6% as at 3Q07, approaching the 60% regulatory limit. As MLT will continue to make acquisitions, it intends to resort to equity fund-raising in 1H08.

• Rental escalation potential. MLT has a balanced portfolio of long leases (longer than three years with built-in rental escalation) and short leases (less than three years with the potential for rental escalation). Rental reversions have been strong in Hong Kong and China, at 13% and 39% respectively. Occupancy for the entire portfolio is 99.9%.

• Expect more geographical diversification. We expect acquisitions from new emerging markets such as India, Taiwan and Thailand. These would dilute the share of contributions from Singapore, currently at 52%, a positive diversification. In addition, sponsor Mapletree Investments is incubating some 10 development projects in China, Malaysia and Vietnam worth S$846m, which could be injected into MLT’s portfolio when completed.

• Maintain Outperform. With MLT steadily working towards its S$5bn portfolio target by FY10, we expect our DPU estimate of 7cts for FY08 to be achievable. We reiterate our Outperform with a DDM-based target price of S$1.65. This is premised on a cost of equity assumption of 6.9%.

Strong growth plans…

Conducive growth environment

• Expect higher distributable income in 3Q07. MLT will be releasing its 3Q07 results on 25 Oct. We expect increased distributable income of S$20m, up 87% yoy and 13% qoq, powered by the acquisition of 32 properties totalling S$883m YTD. This includes the completion of acquisitions made in FY06 as well as acquisitions announced in FY07. DPU is expected to reach 6.4cts, 10% above our previous estimate of 5.8cts for the whole of FY07.

• DPU upgrade. In view of higher distributable income expectations for 2H07 with more completed properties, we have increased our DPU forecasts for FY07-09 by 10-13%.

• Low interest rates good for acquisitions. As long leases in MLT’s existing portfolio limit rental reversions and escalation, MLT’s income growth would be mainly driven by acquisitions, we believe. The downtrend in US interest rates is therefore a positive for MLT, which is highly leveraged.

• Maintain Outperform with a higher target price of S$1.65. Following our DPU upgrades, we have raised our DDM-derived target price from S$1.43 to S$1.65. We have also rolled over our valuation basis to CY08, with an unchanged cost of equity assumption of 6.9%.

Updates from roadshow