• 4QFY15 DPU down 2.1% YoY
• Positive rental reversions of 8% in FY15
• Outlook still soft

4QFY15 results within expectations

Mapletree Logistics Trust (MLT) reported a soft set of 4QFY15 results, as DPU slipped 2.1% YoY to 1.85 S cents despite a 5.7% growth in revenue to S$84.7m. This was attributed largely to higher property expenses (+21.3% YoY) and borrowing costs (+22.6%). For FY15, gross revenue rose 6.2% YoY to S$330.1m while DPU increased slightly by 2.0% to 7.5 S cents. This was within our expectations as gross revenue and DPU formed 99.9% and 98.6% of our fullyear forecasts, respectively.

Operations impacted by conversion of leases in Singapore

MLT’s operational performance was affected by downtime at several of its Singapore properties which underwent conversion from single-user assets (SUAs) to multi-tenanted buildings (MTBs) during FY15. This had a negative impact on its occupancy rate and net property income (NPI) margin, which eased 1.6 ppt and 2.1 ppt to 96.7% and 84%, respectively. Nevertheless, on a positive note, only its Singapore assets registered a decline in occupancy rates for FY15, while overall average rental reversions of 8.0% were achieved. Management has also mitigated its financial risks, as it has hedged 80% of its total debt into fixed rates. 80% of its income stream for FY16 have also been hedged into or derived in SGD.

Reiterate HOLD

Looking ahead, ~24% of MLT’s leases (by NLA) are expiring in FY16, of which 10% are leases for SUAs and 14% are leases for MTBs. As most of the SUAs in Singapore are expected to be converted to MTBs, we continue to see some pressure on MLT’s occupancy rate and margins. We trim our FY16 and FY17 DPU forecasts by 2%, but as we roll forward our valuations, our DDMderived fair value estimate inches up slightly from S$1.12 to S$1.14. Maintain HOLD, given the lack of near-term catalysts. The stock is, however, trading at a decent FY16F distribution yield of 6.1%.

Source: OCBC Research - 21 Apr 2015