• 1QFY19 DPU rose 3.7% YoY
• Healthy distribution from divestment gains
• Rental reversions +2%

1QFY19 Results Within Expectations

Mapletree Logistics Trust (MLT) started FY19 on a healthy note, reporting a 3.7% YoY growth in its DPU to 1.957 S cents for 1Q. This met our expectations as it accounted for 25.2% of our FY19 forecast. Gross revenue and NPI jumped 10.1% and 11.1% YoY to S$105.4m and S$89.8m, respectively. The latter formed 24.7% of our full-year projection.

Sharing the Love From Divestment Gains

During the end of the quarter, MLT completed the divestment of 7 Tai Seng Drive to its sister REIT Mapletree Industrial Trust for a sale consideration of S$68m. It thus recorded a firm net divestment accounting gain of S$34.3m on its P&L statement.

As management typically distributes out its divestment gains with reference to its original purchase price less transaction costs and taxes (if any), MLT highlighted that it would pay out a distribution of S$1.92m per quarter for 12 quarters. This started from 1QFY19 and works out to a healthy distribution of S$7.7m (~0.24 S cents per unit) per annum for three years.

The reason why MLT was able to clock in a significant divestment gain was because of the asset’s potential to be upgraded into a data centre, which we believe is not MLT’s forte.

We raise our FY19F and FY20F DPU by 1.6% and 1.1%, respectively, as we had previously assumed that management would retain some of the divestment gains to be redeployed for acquisitions. Our fair value remains unchanged at S$1.34.

We have not factored in MLT’s recent proposed acquisition of five ramp-up logistics properties in Singapore as we await details of the funding structure and approvals from the shareholders of CWT International Limited.

Positive Rental Reversions

Operationally, MLT delivered positive average rental reversion of 2%, and this was attributable mainly to China, Malaysia and Hong Kong. Portfolio occupancy fell 0.9 ppt QoQ to 95.7%. This was because of the addition of 11 newly acquired properties (50% interest) in Chinawhich are 84.8% occupied.

However, some ofthe properties were only newly completed andthe committed leases would commence in Jul / Aug this year. Including the committed leases,MLT’s occupancy rate would be 98.3% for the 11properties and 97.1% for its entire portfolio.

Source: OCBC Research - 24 Jul 2018