Mapletree Logistics Trust - A blue chip yield of 8.0% (DBSV)

BUY S$0.86

Price Target : S$ 1.07

At a Glance

• 3Q11 DPU of 1.69 Scts in line (73% of FY11 estimates)

• Financial metrics remain strong, gearing of 41% is comfortable

• Maintain BUY and S$1.07 TP based on DCF

Comment on Results

3Q11 results in line. Revenues and net property income grew by 25% and 24.% to S$68.3m and S$58.9m respectively, benefiting from an enlarged portfolio. MLT had acquired 14 properties in 2010 and an additional 4 assets since the start of 2011. Occupancy levels remain well supported at 99% as of 3Q11. Distributable income increased by a higher 30% to S$40.9m as a result of lower than proportionate increase in borrowing costs and hedging of its HKD income streams, which mitigated the impact of the HKD depreciation against the S$. DPU increased by lower 10% to 1.69 Scts due to an enlarged share base. DPU includes 0.03 Scts from divestment gains of 9 and 39 Tampines.

The group continues to see active leasing enquiries across all geographies and healthy occupancy levels. In 3Q11, MLT achieved organic growth of 6% yoy - rental renewals at up to 12%, while 3 properties (which were converted from single tenanted to multitenanted buildings) reportedly achieved higher renewal growth of between 30-50%. The trust also announced that they have obtained permission to redevelop 21/23 Benoi Sector to a maximum plot ratio of 2.5x (from the current 1.4x), potentially adding 70k sqm to the portfolio.

Financial metrics remain strong; debt expiry profile extended to 3.7 years. To date, MLT has renewed a substantial portion of its JPY loans expiring in 2011 (JPY 17.3bn or S$281m) at a competitive rate for another 6 years, lengthening its debt maturity profile to 3.7years. Gearing ratio stands at 41%. While this is higher than industrial peers, it remains comfortable in our view, given its strong sponsor backing and that its portfolio is unencumbered. We note that MLT has taken local currency loans as a natural hedge against currency fluctuations and these provide tax shelters for its overseas exposure.

Recommendation

BUY, S$1.07 TP maintained. Yields of close to 7.7-8.0% are attractive in our view; re-rating catalysts likely to hinge on the manager’s ability to continue sourcing accretive acquisitions that will grow distributions. TP is maintained at S$1.07 as we roll forward our valuations to FY12F.