• 4QFY18 DPU grew 4.1% YoY
• Cross-selling opportunities
• Longer-term benefits from proposed acquisition

4QFY18 Results Met Expectations

Mapletree Logistics Trust (MLT) reported its 4QFY18 results which met our expectations. Gross revenue and NPI jumped 11.4% and 13.7% YoY to S$107.5m and S$91.3m, respectively. Due to an enlarged unit base and higher finance costs, DPU grew at a smaller magnitude of 4.1% YoY to 1.937 S cents. On a full-year basis, MLT’s gross revenue and NPI rose 5.9% and 6.9% to S$395.2m and S$333.8m, respectively, with the latter forming 98.4% of our FY18 forecast. DPU of 7.618 S cents (+2.4%) closely matched our 7.60 S cents projection.

Proposed Acquisition of 50% Interest in 11 Properties in China

Separately, MLT also announced the proposed acquisition of a 50% indirect interest in 11 logistics properties in China for an approximate price of RMB985.3m (S$205.3m). Its sponsor Mapletree Investments Pte Ltd will hold the remaining 50% interest in the properties. The implied NPI yield is estimated to be 6.4%, based on the aggregate agreed property value. The top tenants for this portfolio include JD.com, Cainiao Smart Logistics Network Limited and Sinotrans Limited.

We were initially lukewarm over this proposed transaction in the near-term, given the estimated pro forma DPU accretion of only 0.4% (possibly even dilutive in the first year if issuance price for its equity fund raising exercise falls below its S$1.20 illustrative issuance price), while there are also uncertainties over the ongoing trade tensions between China and the U.S.

However, management highlighted that one of its key strategies would be cross selling opportunities as a number of tenants from this acquisition are interested to expand in SouthEast Asia. It may also be able to benefit from higher Grade A warehouse rental growth of 2.7%-5.1% in 2018 and 3.5%-5.9% in 2019 for the 11 Chinese cities where the proposed acquisition properties are located, according to an independent market research consultant.

Furthermore, the proportion of overall gross revenue from e-commerce related tenants will increase from 24% to ~26% post completion of this acquisition. We fine-tune our assumptions and now factor in lower distributions from the divestment gains from 7 Tai Seng Drive.

Our fair value inches down from S$1.48 to S$1.44.

Source: OCBC Research - 30 Apr 2018