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Analysts keep ‘buy’ calls on MLT after 1QFY2025 results

Ashley Lo
Ashley Lo • 4 min read
Analysts keep ‘buy’ calls on MLT after 1QFY2025 results
In 1QFY2025, the REIT's revenue and NPI increased 0.4% q-o-q and 0.9% q-o-q respectively. Photo Bloomberg
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Analysts are keeping their “buy” calls on Mapletree Logistics Trust M44U

(MLT) after the REIT reported an 8.9% y-o-y drop in its distribution per unit (DPU) of 2.068 cents for the 1QFY2025 ended June. The REIT’s distributable income fell due to higher borrowing costs and lower divestment gains. The DPU also dipped from an enlarged unit base.

Maybank Securities analyst Krishna Guha has kept his “buy” call on MLT with an unchanged target price of $1.32 as he sees a “tactical opportunity” from a turn in regional foreign exchange (forex).

Under MLT’s new CEO, the REIT is “staying the course”, as it continues with its portfolio rejuvenation. The REIT is focusing on Asian logistics properties and is taking a long view of China, notes Guha.

“Longer term, MLT’s regional warehouse footprint is attractive. Accelerated pace of recycling will offset headwinds from new supply and slower China,” he writes in his July 26 report. 

He adds: “While distribution pressure will continue, a turn in regional foreign currency may provide relief." 

In 1QFY2025, MLT’s gross revenue and net property income fell 0.3% y-o-y and 0.9% y-o-y, respectively. 

See also: KGI Asia maintains ‘buy’ call and TP of $3.60 for Wilmar International

This comes on the back of lower contributions from China, an absence of revenue from divested properties and foreign currency weakness. 

However, this was partly offset by contributions from new assets and organic growth in Singapore and Hong Kong .

Meanwhile, revenue and NPI increased 0.4% q-o-q and 0.9% q-o-q respectively following contributions from the REIT’s acquired assets. 

See also: Brokers' Digest: Riverstone, Aztech Global, UOL Group

Additionally, the portfolio occupancy dipped to 95.7% from 96% in 4QFY2023 previously. 

Occupancy in China remained stable at approximately 93%, while Singapore and Vietnam saw lower occupancy levels due to leasing downtime. 

Portfolio reversion stood at 2.6% or 4.6% excluding China. 

“China reversion will be in negative low teens range,” adds the analyst. 

Overall, the REIT’s gearing rose 70 basis points (bps) to 39.6% while borrowing cost remained stable at 2.7% 

Management has since guided for higher borrowing cost as foreign currencies and rate hedges continue to reprice. 

For 1QFY2025, MLT has announced the completion of its divestment of approximately $40 million and a full fiscal target of $150 million - $200 million which is lower than the analyst’s prior guide of $200 million - $500 million. 

For more stories about where money flows, click here for Capital Section

The REIT’s divestment gains are more likely to be used for debt repayment, in the analyst’s view. 

As a result, the analyst has left his DPU forecast unchanged which is currently below the Street’s. 

Meanwhile, the OCBC Investment Research (OIR) team has lowered its FY2025 and FY2026 DPU forecasts by 6.7% and 4.7% respectively, factoring in lower distributions of divestment gains, higher borrowing costs and lower contributions from China and Japan.

Moving forward, the REIT’s cost of debt is expected to increase due to interest rate swaps. Upon maturation, these interest rates are set to be replaced at a higher cost, in the team’s view. 

It adds: “Given MLT’s current gearing level, its focus will be on divestments and the pace of acquisitions will depend on the magnitude of these asset sales.” 

As a result, the OIR has maintained its “buy” call on Suntec Reit T82U

while lowering its target price to $1.65 from $1.73 previously. 

Similarly, Morningstar Equity analyst Xavier Lee has lowered his target price for the REIT by 6 cents to $1.54 from $1.60. 

Despite lowering his FY2025 - FY2027 DPU estimates, the analyst views the REIT as “undervalued” due to its attractive fiscal 2025 distribution yield of 6.3%. 

“That said, we think that persistent weakness in the China logistics portfolio may continue to weigh on its unit price performance,” says the analyst. 

Lee also notes the REIT’s commitment to prioritize unitholders' interests in real estate investment trusts sponsored by Mapletree, as announced by current Mapletree Group deputy CEO, Chua Tiow Chye. 

Under MLT’s latest five-year plan, it aims to increase assets under management (AUM) from $77.5 billion as at March 31 to  $100 billion - $120 billion by end-March 2029. 

The REIT is expected to contribute to the group’s goal by increasing its AUM by $5 billion during the same period. 

“In our view, the target is somewhat ambitious and would require the trust to be able to raise equity due to the high absolute size and gearing,” says the analyst. 

Following current market environments and the REIT’s weak unit price performance year to date, large-scale acquisitions will likely happen in the medium term rather than the near term, in the analyst’s view. 

As at 3.06pm, shares in MLT are trading at an unchanged $1.30. 

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