Results in Line, Further Re-rating Ahead

• Mapletree Logistics Trust (SGX:M44U) delivered a stable 1Q21 as DPU rose 1.0% y-o-y with higher rental income and earlier acquisitions offsetting its divestments and provisions for rental relief.
• We raised FY21 DPUs (by 2%) and expect its occupancies to remain resilient on steady demand growth. Mapletree Logistics Trust’s growing APAC- focused AUM is well-placed in capturing the sector’s multiple structural growth themes – rising e-commerce demand and supply chain diversification - which have been accelerated by the COVID-19 pandemic.
• Our DDM-based Target Price (COE: 5.6%, LTG: 2.0%) rises further to SGD2.25. BUY.

Better Reversions in China, HK, M’sia and Vietnam

• Mapletree Logistics Trust's 1Q21 revenue and NPI rose 10.5% y-o-y and 12.0% y-o-y with higher contributions from existing properties and acquisitions in M’sia, Vietnam, S.Korea, and Japan in FY20 offsetting divestments, and SGD4.7m in rental rebates to COVID-impacted tenants.
• Portfolio occupancy dipped slightly from 98.0% to 97.2%, due to lower occupancies in China (96.3% to 92.3%) with completion of Ouluo’s Phase 2 redevelopment and S.Korea (96.0% to 94.7%).
• Rental reversion was +1.9%, vs +2.0% in 4Q20, led by stronger reversions in China (+4.8%), Vietnam, HK and M’sia (+2.5%).

Strong Leasing Activity

• Leasing activity was strong with 326k sm renewed or replaced during the quarter (up 43.5% q-o-q) with single-asset expiries over FY21-22 remaining low at 1.2-2.4%, and its WALE stable at 4.3 years.
• According to management, all Mapletree Logistics Trust's tenants have resumed operations except for 1.3% of its revenue base. Demand continues to be driven by e-commerce tenancies which now contribute 25-30% of its revenue, up from 15% five years earlier, and we expect occupancies in M’sia and Vietnam to be underpinned by its tenants’ supply chain diversification strategies.

A Quiet Quarter for Deals; Eyeing Sponsor’s Pipeline

• Management announced a small acquisition, a Grade A logistics property (115 Rudd Street, Inala) in Brisbane, Australia for AUD21.3m (SGD20.2m) at 5.4% NPI yield. The property is backed by a 10-year master lease to Decina Bathroomware with parent escalations and is expected to complete in 3Q21.
• Mapletree Logistics Trust's leverage rose marginally to 39.6% (from 39.3%), with SGD0.9-1.9b in debt headroom (at 45-50% leverage limits) as it eyes its sponsor’s pipeline in China, M’sia and Vietnam.

Source: Maybank Kim Eng Research - 21 Jul 2020