Mapletree Logistics Trust: Keen focus on portfolio rejuvenation
Related Stories
- 1QFY17 DPU of 1.816 Scts (+0.2% y/y, -0.2% q/q) in line with estimates
- China’s rental drag is stabilising, with other key markets to drive organic steady organic growth in the coming quarters
- Capital recycling remains key; manager will continue to prolong portfolio’s growth runway through optimising returns; targeting to acquire assets in key regional markets of Vietnam, Malaysia and India
- Undemanding valuations at 1.0x P/B, FY 26F yield of 6.0, BUY TP SG 1.55!
What has happened.
Stable 1QFY27 with capital recycling taking centre stage. MLT delivered a broadly in-line quarter with DPU inching up 0.2% y/y to 1.816 Scts (c.25% of forecasts), supported by resilient operating performance and lower y/y borrowing costs. Gross revenue and NPI increased 0.8% and 2.0% y/y, respectively, driven by the full-quarter contribution from the India acquisition and Mapletree Joo Koon Logistics Hub, partly offset by divestments and FX headwinds. While portfolio occupancy remained healthy at 96.4%, we note that reversionary momentum softened to 0.9% from 3.3% in the previous quarter. Excluding China, rental reversion remained positive at 2.3%, although it also moderated from 4.2% previously. Looking ahead, ex-China, MLT key markets of Singapore, Vietnam, Malaysia and India to continue delivering healthy 4%-5% rental reversions, while China is likely to remain at a c.-2% range as elevated market vacancies continue to weigh on rents. Australia will remain a near-term data- point as management is still backfilling space vacated by a tenant relocating to its own build-to-suit facility. Despite the softer leasing backdrop, Mapletree Joo Koon is now fully committed and contributing to earnings, providing a stable earnings base. Financial management remains conservative with gearing stable at 40.5%, cost of debt at 2.6% (flat q/q) and expected to trend higher 2.7%-2.8% as the manage roll-off low hedges and refinance the JPY debt (priced in).
Our view
Capital recycling remains the key catalyst. Looking ahead, apart from focusing on divestments – management targets to deliver up to SGD 300mn of divestments in the current FY, (SGD 155mn completed, up to SGD 150mn more), with potential divestments in China, Australia and Japan. The manager is also scouting for deals and sees accretive opportunities in Malaysia, Vietnam and India (positive spreads vs funding costs) which we believe could be tapped from their sponsor pipeline / 3rd parties. Encouragingly, the recently announced disposals were completed at premiums of 1%-20% to valuation, although management emphasised that the focus of divestments will be to protect the REIT’s NAV. The manager remains focused on growing its Singapore portfolio but remains highly selective on opportunities, focusing on properties with modern logistics specifications. Overall, we believe this to be a positive results print for MLT and at 1.0x P/B, FY26F yield of 6.0%, is an attractive re-entry point for the stock.
| 1QFY27 | 1QFY27 | 1QFY26 | y/y | 4QFY26 | q/q |
| Gross Revenue (SGD mn) | 178.9 | 177.4 | 0.8% | 176.6 | 1.3% |
| Net Property Income (SGD mn) | 156.4 | 153.4 | 2.0% | 151.4 | 3.3% |
| NPI Margin (%) | 87.4 | 86.5 | +0.9ppt | 85.8 | +1.6ppt |
| Borrowing Costs (SGD mn) | (38.3) | (39.4) | (2.7%) | (37.5) | 2.0% |
| Amount Distributable (SGD mn) | 98.6 | 97.6 | 1.0% | 98.6 | 0.1% |
| Distributable to Unitholders (SGD mn) | 93.0 | 92.0 | 1.1% | 93.0 | 0.0% |
| DPU (Scts) | 1.816 | 1.812 | 0.2% | 1.819 | -0.2% |
| Aggregate Leverage (%) | 40.5 | - |
| 40.6 | - |
| Average Cost of Debt (%) | 2.6 | - |
| 2.6 | - |
| Debt Fixed (%) | 82 | - |
| 83 | - |
Source: company
Key take-aways from analyst call:
- Capital recycling and redeployment will be the key driver of medium-term growth. Management reiterated that proceeds from China and other divestments are likely to be redeployed into higher-growth markets such as Vietnam, Malaysia and India. These markets continue to record robust rental growth of around 4%-5%, with management targeting portfolio reversions around current levels.
- Divestment guidance implies another SGD50mn-150mn of potential sales. Including the SGD155mn of transactions announced after 1QFY27, management indicated a current divestment target of around SGD300mn, implying further disposals of approximately up to SGD 150mn for the coming year is realisable. In the medium term, the manager maintains its goal of divesting SGD 1.0bn of properties, targeting at assets, which they view to have maxed out their capital value.
- Rental growth remains positive outside China, but leasing momentum is normalising. Portfolio rental reversion moderated to 0.9% from 3.3% q/q, while ex-China reversion slowed to 2.3% from 4.2%. Management expects Singapore reversions to remain around 4%-5%, supported by MLT’s Grade A warehouse specifications, which are differentiated from much of the available ramp-up industrial supply. Vietnam, Malaysia and India are also expected to deliver around 4%-5% rental growth. These markets will anchor the steady growth for the trust in the coming quarters.
- While China remains a drag, rental pressure is stabilising. We expect to see China reversions to remain in the low-single-digit negative range. China’s rental reversion improved to negative 1.8% from negative 2.0% q/q and negative 7.5% a year ago, but elevated market vacancies and uneven regional fundamentals suggest that a full recovery will take time.
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