1QFY3/14 results in-line. 1QFY3/14 revenue at SGD75.4m (-1% QoQ; -2% YoY) was 24% of ours and 25% of consensus estimate. The YoY decline was mainly due to the depreciation of the Japanese Yen. 1QFY3/14 DPU at 1.80 SG-cts (+4% QoQ; +5.9% YoY) was 25% of ours and consensus estimate. The impact of the Japanese Yen depreciation on distributable income was mitigated by currency hedges as the income stream for the quarter was fully hedged into or derived in Singapore dollar. The 1Q FY13/14 results also benefitted from a SGD2.9m or 28% YoY fall in borrowing costs. Aggregate leverage stayed flattish at 34% while interest rate inched down to 1.9% (prev. 2.4%) with an average term of debt of 4.0 years. The lower interest rates were due to new interest rate swaps and fixed rate notes entered into during the quarter to replace expiring interest rate hedges.

Top Up Strategy. 1QFY3/14 results included the partial distribution of the net gain from the divestment of 30 Woodlands Loop. The SGD4.96m divestment gain will be distributed over eight quarters commencing from this quarter. This translated to SGD0.6m in amount distributable per quarter or about 0.025 SG-cts per unit. Excluding this gain, 1QFY3/14 DPU would have been 1.78 SG-cts (+2.9% QoQ; +4.7% YoY).

Impact of JPY Depreciation. We noted that the Japan portfolio suffered a 5% QoQ decline in revenue and NPI. This was attributed to the weakening of Yen against SGD, which has depreciated ~4% last quarter. MLT also has seven out its top ten tenants that are Japanese corporations, amounting to ~12% of 1QFY3/14 gross revenue. Nonetheless, management maintained that the JPY impact on DPU is offset by its existing forex hedges, which is ~90% hedged in FY3/14 and more than 50% hedged in FY3/15-FY3/16.

More acquisitions in FY3/14? Management admitted that growth was lethargic in FY3/13 and will be more aggressive on the acquisition front this year, targeting sponsor injections such as Mapletree Shah Alam Logistics Park in Malaysia (almost fully leased) and Mapletree Zhengzhou International Logistics Park in China. Both acquisitions are likely to cost ~SGD80m with 7-8% NPI yield-on-cost. MLT also cited possible acquisitions in China/Korea/Malaysia/Singapore and BTS initiatives in Singapore/China. Its redevelopment project at 21 Benoi Sector is on track for completion in 3QFY3/14 and is 94% pre-committed. Given the high valuation it is currently trading (1.2x P/B), and the absence of concrete catalysts, we believe this counter is fairly priced at the moment. Reiterate HOLD with TP of SGD1.05.

Source: Maybank Kim Eng Research - 19 Jul 2013