Mapletree Logistics Trust: Saving for a rainy day
- FY25 DPU of 8.053 Scts in line with our and consensus estimates
- 85% of tenant trades serve domestic demand with minimal export exposure to export trades
- Distribution estimates cut by 13%% in FY26F on exclusion of divestment gains
- Maintain BUY, TP lowered to SGD 1.55
(+) Dip in FY25 DPU well anticipated by the market. Mapletree Logistics Trust (“MLT”) reported FY25 DPU of 8.053 Scts (-10.6% y/y), which was in line with our and consensus estimates. Stripping out divestment gains of SGD27mn (vs SGD 41.5mn a year ago), core DPU would have come in at 7.519 Scts, -7.9% y/y. For 4QFY25, MLT reported a DPU of 1.955 Scts (-11.6% y/y, -2% q/q). For the full year, revenue declined by 0.9% y/y to SGD 727mn while net property income (“NPI”) fell 1.5% to SGD 625.1mn. NPI margins declined to 86.0% (vs 86.5% a year ago). The drop was due to lower contribution from China, divested properties and general currency weakness against the SGD, mitigated by stronger performance from the REIT’s Singapore, Australia and Hong Kong properties, coupled with acquisitions. Overall cost of borrowing also increased due to higher debt cost (2.7%) and incremental borrowings to fund acquisitions.
The REIT also reported a 0.8% rise in property valuation to SGD 13.3bn, supported by acquisitions and ongoing development projects. MLT recorded a SGD 62.0mn fair value loss mainly due to China (2bps expansion in cap rates), Korea (up to 40 bps expansion in cap rates) and Singapore (50 bps expansion in cap rates). This drove a slight uptick in gearing to 40.7% (vs 40.3% a quarter ago) and a marginal dip in NAVs to SGD 1.31/unit.
Our view
(+) Financial metrics stable; manager to retain future divestment gains to boost flexibility
MAS leverage ratio remained stable at 40.7% (+ 0.4% ppt q/q), with (debt + perpetual) / asset ratio increasing slightly to 45.5%, which was impacted by a year-end devaluation exercise coupled with the manager taking on more debt for acquisitions. Given the market uncertainty brought about by US-China trade war, and that leverage is at the higher end of the historical range, the manager has decided to hold back distributing its past undistributed divestment gains, amounting to close to c.SGD 19.0mn, a prudent move, in our opinion. Overall interest cost was steady at 2.7% (+flat q/q and y/y). Despite the overall increase in interest rates, MLT was able to keep its overall interest burden within control through active management of the REIT’s debt expiry profile and debt currency mix. Looking ahead, management expects that overall cost of debt to rise, as hedges roll off through 2025 but still remain within 3.0% (within our projections).
We do note a slight dip in MLT’s T12M EBITDA adjusted interest coverage ratio (“ICR”) including perpetual interests, which continued to trend around the c.2.88x (from 2.89 a quarter ago) levels. Looking ahead, given the rise in interest rates offset by continued growth in cashflows, we expect that EBITDA ICR ratio is likely to remain close to current levels.
(+) Majority of tenant trades focused on supporting domestic demand.
MLT estimates that 85% of their tenants in the portfolio (by revenue) serve domestic consumption and the remaining 15% are tenants engaged in the export trade, providing comfort that overall demand for their warehouses should remain stable. Portfolio occupancy has remained stable at 96.2% (vs 96.3% a quarter ago). We note slight transitional dips in SG (95.9%, - 0.4%ppt q/q) and Malaysia (97.1%, -0.4%ppt q/q) with some improvement in China (94%, +0.5%ppt q/q) and Japan (99.7%, +0.9%ppt q/q). We are closely watching the REIT’s China properties (c.20% of revenues) where rental reversions still remain weak but occupancy rate has been stable throughout the past few quarters. We understand that the operating environment remains uncertain, especially for the REIT’s Tier 2 cities in China (c.9%-10% of revenues) where the current oversupply situation remains a key overhang. Rental reversions in China remain weak but reversions have trended towards the -9% level and should gradually be flattish ahead. Overall portfolio rental reversions remained positive at 5.1% (or 6.9% ex-China) with most markets seeing upside to rentals.
(+) Active asset and capital management the key to success
MLT continues to diversify its earnings base through active acquisitions albeit selectively. In addition, there is close to another c.SGD380mn in active asset redevelopment (completing in 1QFY26F and in 1H28 respective) in Singapore and Malaysia to drive upside to DPUs and NAVs over time. To fund these initiatives, MLT will look to actively recycle capital through divestments of assets who have achieved close to their asset life cycle. We note that the REIT have achieved a divestment premium of c.17% historically and could look to achieve that opportunistically for future divestments.
Distribution income revision to reflect core earnings trend.
We have adjusted MLT’s FY26F/27F DPU to reflect core earnings (excluding divestment gains) coupled with slight adjustments to our currency assumptions. This resulted in a 13-16%% y/y drop in FY26-27F DPU to 7.1Scts and 7.2Scts, respectively.
At current price, MLT trades at a P/B of 0.9x and offers an attractive yield of >6.0%. If interest rates ease, we expect stronger allocations into S-REITs, especially those with defensive sector exposure. MLT is well positioned to weather through economic downshifts, and deliver attractive total returns at the current level. Maintain BUY for MLT.
FY Mar | 2H2024 | 1H2025 | 2H2025 | % chg y/y | % chg h/h |
Gross revenue | 365 | 365 | 366 | 0.2 | 0.2 |
Property expenses | (50.2) | (49.7) | (49.9) | (0.5) | 0.4 |
Net Property Income | 315 | 315 | 316 | 0.3 | 0.2 |
Other Operating expenses | (59.8) | (48.6) | (48.4) | (19.1) | (0.3) |
Other Non Opg (Exp)/Inc | (5.2) | (16.1) | (10.6) | (103.3) | (34.3) |
Associates & JV Inc | 0.0 | 0.0 | 0.0 | - | - |
Net Interest (Exp)/Inc | (72.5) | (77.0) | (78.3) | (8.1) | (1.8) |
Exceptional Gain/(Loss) | 4.04 | 8.72 | 9.35 | 131.4 | 7.2 |
Net Income | 181 | 182 | 188 | 3.6 | 3.0 |
Tax | (28.6) | (36.8) | (36.2) | 26.5 | (1.6) |
Minority Interest | (1.5) | 0.00 | (0.5) | 68.4 | nm |
Net Income after Tax | 139 | 133 | 139 | (0.4) | 4.4 |
Total Return | 0.0 | 545 | 0.17 | nm | nm |
Non-tax deductible Items | 0.0 | (119) | (0.1) | nm | (99.9) |
Net Inc available for Dist. | 0.02 | 433 | 0.25 | 1,167.5 | (99.9) |
Ratio (%) |
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Net Prop Inc Margin | 86.3 | 86.4 | 86.4 |
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Dist. Payout Ratio | 100.0 | 100.0 | 100.0 |
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