Delivering Ahead Again; Upping MLT's DPU Forecast & Target Price

• Mapletree Logistics Trust (SGX:M44U) delivered a strong 1Q22, ahead of both ours and consensus’ estimates, as DPU increased 5.7% y-o-y (or +10.7% y-o-y, excluding the impact of divestment gains), driven by higher rental income and contribution from S$1.6b in acquisitions completed in FY21.
• We expect occupancies to stay resilient on the back of steady demand growth, and raised DPUs by 4% on stronger rental assumptions. Tightening cap rates amid strong liquidity could ease deal momentum in FY22, even as Mapletree Logistics Trust eyes DPU upside from rejuvenation opportunities in Singapore.
• Our DDM-based target price for Mapletree Logistics Trust (COE: 5.7%, LTG: 2.0%) rises to S$2.35 (from S$2.25). Maintain BUY.

Better Reversions in Vietnam, Hong Kong, Singapore

• Mapletree Logistics Trust's 1Q22 revenue and NPI rose 23.7% y-o-y and 21.3% y-o-y, with higher contributions from its existing properties, acquisitions and the completed Ouluo Phase 2 redevelopment. Portfolio occupancy rose from 97.5% to 97.8%, as higher occupancies in South Korea (97.2% to 98.4%) and China (95.3% to 96.5%) offset transitory vacancy in Singapore (as occupancy fell from 98.1% to 97.6%).
• Mapletree Logistics Trust's portfolio rental reversion was +2.2% (vs +2.4% in 4Q21), mainly from leases in Vietnam (+5.3%), Hong Kong (+2.9%) and Singapore (+1.6%).

Strong Leasing Momentum, Positive Rent Trajectory

• Leasing momentum was strong with ~391k occupancies to remain resilient, as demand continues to be driven by e-commerce tenancies and 3PLs. While its retail sector occupiers have adopted a wait-and-see approach, Mapletree Logistics Trust is looking to drive rental upside from its higher value tenants in the next 9-12 months.

Upside From Acquisitions, Rejuvenation

• Mapletree Logistics Trust's leverage dipped slightly from 38.4% to 38.2% as of end-Jun 2021, which suggests S$1.5b in debt parties. It is eyeing synergies from the 9 Changi South Street deal (announced on 9 Jul), being adjacent to an existing asset, and further targeting potential GFA upside from its fourth Singapore redevelopment project at 51 Benoi Road.
• See complete analysis and Mapletree Logistics Trust's ESG metrics in report attached below.

Source: Maybank Kim Eng Research - 20 Jul 2021