• 3QFY18 DPU grew 2.0% YoY
• Rental reversion of 2%
• Bump up FV and maintain BUY

3QFY18 Results Met Expectations

Mapletree Logistics Trust (MLT) reported its 3QFY18 results which met our expectations. Gross revenue and NPI grew 2.8% and 3.9% YoY to S$98.2m and S$83.0m, respectively. This was driven by contributions from acquisitions in Hong Kong and Australia, but partially offset by loss of income from divestments and redevelopment projects, coupled with impact from a weaker JPY and HKD against the SGD. DPU improved 2.0% YoY to 1.907 S cents. On a 9MFY18 basis, MLT’s gross revenue rose 4.0% to S$287.7m, forming 70.9% of our FY18 forecast.

The acquisition of Mapletree Logistics Hub Tsing Yi in Hong Kong was completed on 12 Oct 2017, and we expect an improved performance ahead from a full quarter of contribution in 4QFY18. DPU of 5.681 S cents for 9MFY18 represented growth of 1.8% and constituted 74.8% of our full-year projection.

Positive Rental Reversions; Recovery in Occupancy in S. Korea

Operationally, MLT registered an average rental reversion of 2%, mainly driven by Hong Kong (+3%) and Vietnam (+5%), while portfolio occupancy inched up 0.4 ppt QoQ to 96.2% due largely to significantly lower vacancies in South Korea. Aggregate leverage ratio stood at 37.8%, as at 31 Dec 2017.

Reiterate BUY

We factor in MLT’s recent capital recycling activities (proposed acquisition of remaining 38% of Shatin No. 3 in Hong Kong and divestment of Senai-UPS in Malaysia) in our model and raise our FY19 DPU forecast by 0.8%. During IMF’s updated World Economic Outlook report, it raised its global growth forecasts by 0.2 ppt to 3.9% for both 2018 and 2019. It also bumped up its world trade volume growth projections by 0.6 ppt to 4.6% for 2018 and 0.5 ppt to 4.4% for 2019.

We believe this trend would benefit logistics players such as MLT. Coupled with a keen eye for a more active acquisition drive, support from its sponsor’s robust pipeline and MLT’s excellent track record of value-adding to its acquisitions, we believe it is justifiable to increase our terminal growth rate assumption from 2% to 2.5%.

Reiterate BUY on MLT with a higher fair value of S$1.48 (previously S$1.35).

Source: OCBC Research - 24 Jan 2018