• Initial NPI yield at 8.3%
• Expected to be DPU-accretive
• Looking at higher growth markets

Expanding footprint in South Korea

Mapletree Logistics Trust (MLT) recently proposed to acquire Daehwa Logistics Centre from vendor Daehwa Logistics Co Ltd. This represents MLT’s investment of the ninth property in South Korea. At a purchase consideration of KRW25.5b (~S$31.2m), the asset is expected to generate an initial NPI yield of 8.3%. MLT intends to fund the acquisition by debt, and expects the transaction to be completed by Jul 2014. Based on our projections, the new addition could add an annualized 0.05 S cents to MLT’s DPU. On the other hand, MLT’s gearing is likely to increase marginally from 33.3% as at 31 Mar to 33.8%.

Details on the new property

Daehwa Logistics Centre is a three-storey Grade A dry warehouse with a GFA of 25,600 sqm located in the prime logistics hub in Seoul. It was completed in Dec 2013, and boasts modern specifications such as a floorto-ceiling height of 10m, floor loading capacity of 2.7 ton/sqm and direct ramp access to all three floors. At present, the warehouse facility is fully occupied by three quality tenants, namely eBay (one of world’s largest e-commerce companies), Acushnet (global golf equipment company) and vendor Daehwa (fast growing local logistics operator). The leases have a weighted average lease to expiry of 3.5 years with built-in annual rental escalations for 70% of the leased area.

Maintain HOLD

We note that the acquisition is consistent with management’s guidance in Apr that it was performing the due diligence for a potential purchase of a Korea-based property. It is also in line with MLT’s strategy to rebalance its portfolio towards South Korea and other higher growth markets. Looking ahead, we believe MLT may turn to the China assets from its sponsor’s pipeline for further growth. However, pending any new development, we only factor in the acquisition of Daehwa Logistics Centre for now. Our fair value remains unchanged at S$1.10. Maintain HOLD on valuation grounds

Source: OCBC Research - 26 Jun 2014