• Downgrade to HOLD on valuations, Target Price S$1.90.
• COVID-19 outbreak may have indirect impact on its operations in China, Hong Kong and Singapore.
• Acquisitions will still feature to supplement growth.

Premium for Safety, Downgrade to HOLD, Target Price S$1.90

• While we remained convinced on Mapletree Logistics Trust (SGX:M44U)’s long-term robust logistics growth story in Asia and ability to grow accretively, we believe that at 1.7x P/NAV and forward yields of 4.1%, a lot of near-term positives are priced in.
• With expectations running high, especially with market chatter that Mapletree Logistics Trust may be at the cusps of a major index inclusion, we see little room for further upside surprises at current levels. We thus downgrade our recommendation to HOLD, with Target Price of S$1.90 maintained.
• A faster and larger than anticipated acquisition momentum will be upside risk to our call.

Where We Differ: Pricing in Acquisitions in FY21

• We retain our optimism that Mapletree Logistics Trust can deliver acquisitions, but likely to be in 2H20 onwards from its key hubs of Malaysia, Vietnam and China which will further deepen its exposure within the ASEAN and Asia’s logistics sector.
• We have assumed S$500m of acquisitions in FY21 funded by 40% debt/ 60% equity and divestments, and this has not been priced in by consensus at this point. Opportunities will likely come from its Sponsor which has an extensive pipeline of acquisition opportunities.

COVID-19 May Impact Operations; But Acquisitions to Mitigate Any Downside

• We understand that the COVID-19 outbreak has indirectly impacted operations for some of its tenants, especially in the consumer space in China, Singapore and Hong Kong, estimated at 10% of revenues. However, the disruptions are likely to be only temporary and any organic growth moderation will be compensated by accretive acquisitions.

Source: DBS Research - 28 Feb 2020