• Mapletree Logistics Trust achieved positive rental reversion of 2.0% while portfolio occupancy edged higher by 0.3ppt q-o-q to 98.0% despite the COVID-19 pandemic. Mapletree Logistics Trust benefits from stockpiling of essential daily necessities and growth in e-commerce transactions, which accounted for 20-25% of its overall business.
• Mapletree Logistics Trust is a potential candidate for inclusion into MSCI Singapore Index.
• Maintain BUY. Target price: S$2.08.

Mapletree Logistics Trust 4QFY20 Results

• Mapletree Logistics Trust (SGX:M44U) reported 4QFY20 DPU of 2.048 S cents (+1.2% y-o-y), bringing FY20 DPU to 8.142 S cents (8.142 S cents).

Continues to Rejuvenate Portfolio

• The improved performance was driven by higher revenue from existing properties and contributions from acquisitions in Malaysia, Vietnam, South Korea and Japan, partly offset by the absence of revenue from six properties in Japan and China divested during the year. Mapletree Logistics Trust acquired nine modern specifications logistics facilities in Malaysia, Vietnam, China (50% interest), South Korea and Japan with total value of S$752.9m in FY20.

Maintained Positive Rental Reversion of 2.0% on Portfolio-wide Basis

• Mapletree Logistics Trust signed 2.7m sf of new and renewed leases in 4QFY20. Mapletree Logistics Trust achieved strong positive reversions in Hong Kong (+3.7%), Malaysia (+4.5%) and Vietnam (+3.9%).

Occupancy Edges Higher

• Portfolio occupancy improved 0.3ppt q-o-q to 98.0% due to higher occupancies in Hong Kong (up 0.7ppt q-o-q to 99.9%, improvement at Grandtech Centre) and China (up 1.3ppt to 96.3%, improvement at Wuxi, Zhenjiang and Nantong). 22.8% of NLA is up for renewal in FY21 (single-user buildings: 3.1%, multi-tenanted buildings: 19.7%).
• Mapletree Logistics Trust has renewed leases for three out of the five single-user buildings and 4% of NLA for multi-tenanted buildings. Thus, only 16% of NLA has to be renewed.

Logistics Offer Resiliency

• The logistics sector is relatively resilient despite the COVID-19 pandemic. Stability is enhanced by diversity of Mapletree Logistics Trust’s geographic and tenant mix. Most of Mapletree Logistics Trust’s tenants across its eight markets are operational. Many countries have imposed social distancing measures and lockdowns, which have caused disruptions to supply chains and market demand.
• Among Mapletree Logistics Trust’s top three core markets, all tenants in Hong Kong and Japan are fully operational, while 5% of its tenants in Singapore are affected (construction-related and furniture makers closed due to Circuit Breaker measures).

More Exposed to Essential Products

• Tenants that serve consumers’ essential daily needs, such as food and beverage, consumer staples (Coles and Woolworths) and healthcare, account for over 30% of Mapletree Logistics Trust’s revenue. Management estimated that tenants from vulnerable industries, such as retail, hospitality and travel, account for about 10% of Mapletree Logistics Trust’s revenue.

Beneficiary of Stockpiling and E-commerce Activities

• Mapletree Logistics Trust has received temporary requests for space due to stockpiling of essential daily necessities, such as rice, which has shored up occupancy in the near term. Management had to reallocate space among tenants to accommodate these urgent requests.
• Mapletree Logistics Trust also benefits from a rise in e-commerce transactions, which accounted for 20-25% of its overall business.

Intends to Maintain Stable Distribution

• Management does not see the need to withhold distribution. Its cash position is strong at S$S$151.2m. It has more than S$700m of available committed credit facilities. However, management is monitoring operational activities over the next three months as the situation is fluid.

Potential to be Included in MSCI Singapore Index

• The impending merger of CapitaLand Mall Trust (SGX:C38U) and CapitaLand Commercial Trust (SGX:C61U), if approved and completed, would remove one component stock from the MSCI Singapore Index. The review for index components is conducted every May and November. Being the next in ranking in terms of market capitalisation and trading liquidity, Mapletree Logistics Trust could be the replacement component stock during the review conducted in Nov 20.

Maintain BUY

• Maintain BUY with target price at S$2.08. Our valuation is based on DDM (required rate of return: 6.0%, terminal growth: 2.0%).

Source: UOB Kay Hian Research - 27 Apr 2020