Mapletree Logistics Trust - Acquisition-fuelled growth (CIMB)

OUTPERFORM Maintained

S$0.94 Target: S$1.05

Mkt.Cap: S$2,281m/US$1,885m

• In line; maintain OUTPERFORM. At 25% of our full-year forecast, MLT’s 2Q11 DPU of 1.60 Scts (+6.6% yoy) met our and consensus estimates. 1H11 DPU of 3.15 Scts works out to 48% of our full-year estimate. There were no major surprises. The positives were occupancy improvements and upward rental reversions, which offset higher operating costs stemming from repairs in Japan and property conversion in Singapore. Management is actively looking for acquisition opportunities and has identified a local property with redevelopment potential. We incorporate the change in year-end in FY3/12 but keep our S$500m acquisition assumption, DPU estimates and DDM-based target price of S$1.05 (8.6% discount rate) pending the analyst briefing. MLT continues to offer an attractive yield of 7%. We maintain our OUTPERFORM call, with the catalysts being accretive acquisitions and AEIs.

• Net property income (NPI) up 25% yoy and 4% qoq. 2Q11 topline rose 27% yoy, thanks to contributions from newly-acquired assets, partially offset by the FX impact from a stronger S$ though the DPU impact was mitigated by FX hedges. The portfolio also benefited from positive rental reversions and a 0.6% pt improvement in occupancy, driven mainly by Singapore assets. NPI however grew by a more muted 25% yoy due to higher property expenses arising from repairs in Japan and the conversion of a local property in 2Q11. Distributable profit increase 26% yoy but DPU was up by a lower 7% due to an enlarged unit base after its equity fundraising in Oct 10. Management also divested two local properties in the quarter and plans to distribute net gains of S$2.1m (0.09 Scts/unit) over the next three quarters.

• Property acquisition and redevelopments. Management continues its search for acquisition opportunities, with a focus on South Korea, Singapore, Japan, China and Malaysia. It also seeks to extract greater yields from its portfolio through conversion and redevelopments. It is in the midst of seeking authorities’ approval for the redevelopment of a local property with underutilised plot ratios.

• 41% asset leverage. Asset leverage was at 41% as at end-2Q11, still below management’s medium-term target of 40-50%. Management successfully rolled forward S$102m debt (7% of total debt) maturing in 2011 and is in advance negotiations to refinance/extend debt maturing in 2012 (31% of total debt).

Update on Japanese properties

Except for Sendai Centre and Iwatsuki Centre, other properties suffered limited damage during the Mar 11 earthquake/ tsunami. The overall repair cost is assessed at about S$1m, of which half was recognised in 2Q11. Iwatsuki Centre is currently going through reconstruction. Any loss of income during this phase will be covered by property insurance. The existing tenant has also indicated its intentions to continue leasing after the reconstruction.