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Analysts like Mapletree Log on stable CWT situation, positive 4Q results

Samantha Chiew
Samantha Chiew • 3 min read
Analysts like Mapletree Log on stable CWT situation, positive 4Q results
SINGAPORE (Apr 30): Analysts like Mapletree Logistics Trust (MLT) given its positive 4Q19 results, stable CWT situation and capital recycling strategy.
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SINGAPORE (Apr 30): Analysts like Mapletree Logistics Trust (MLT) given its positive 4Q19 results, stable CWT situation and capital recycling strategy.

See: Analyst sentiments on Mapletree Logistics Trust turn lukewarm due to valuations

The manager of MLT on Apr 26 announced that its 4Q19 DPU of 2.024 cents, 4.5% y-o-y , as the amount distributable to unitholders increased by 23.8% y-o-y to $73.3 million.

Gross revenue for the quarter came in at $121.4 million, 13.0% higher than $107.5 million a year ago, bringing net profit income (NPI) to $105.0 million, 15.0% higher than the year before.

On a final year basis, FY19 DPU was 7.941 cents, 4.2% higher than 7.618 cents in FY18.

See: MLT posts 4.5% rise in 4Q DPU to 2.024 cents on higher revenue

Following the results announcement, DBS Group Research is keeping its “buy” call on MLT with a higher target price of $1.60 from $1.50 previously.

In a Monday report, lead analyst Derek Tan says, “We believe that all growth engines are firing and MLT remains firmly on the acquisition growth path.”

The trust’s 4Q19 results have indicated that the worst is over and most of its major markets continue to offer organic growth while the manager remains to be on the lookout for more value-accretive acquisitions.

“Our TP of $1.60 is above consensus and we believe the street has not factored the REIT’s potential to surprise on the upside organically and through more acquisitions. MLT, through its focus in its key markets of Hong Kong, Singapore, Japan and Australia, offers stronger income visibility and growth than before,” says Tan.

Tan believes that well-timed acquisitions and ongoing asset reconstitution strategy will augment a steady DPU growth profile for MLT of 1-4% over FY20-21, with upside from potential gains that the manager will typically share when it happens. He has assumed $500 million of acquisitions in FY20.

Meanwhile, the analyst believes that the current CWT situation is manageable, as the manager has noted that CWT Limited is prompt in rental payments and it is monitoring the situation closely. Also, the rent payable by CWT Limited is at current market rate, implying that in the worst case scenario, Tan does not foresee any major downside to distributions.

On the other hand, OCBC Investment Research continues to rate MLT “hold” with a decreased target price of $1.38 from $1.45 previously.

MLT’s results were in-line with the research house’s expectations. And operationally, MLT achieved average rental reversions of +2% in FY19, driven by Hong Kong, Vietnam and China. Porfolio occupancy also remained firm at 98.0%.

Despite CWT International (the parent company of CWT Limited) defaulting on its loans and lenders seizing company assets, including its stake in CWT Limited, management has reiterated that it is still business as usual for CWT Limited, with no rental arrears or defaults.

See: HNA unit's lenders seize assets as payment deadline missed

It also appears that the receiver has no intention to disrupt CWT Limited’s operations for now.

Moreover, MLT has also received queries from other 3PLs providers expressing an interest to take over CWT Limited’s operations if available.

Meanwhile, MLT recorded a revaluation gain of $203.0 million for its investment properties in FY19, due to cap rate compression across most of its markets ranging from 10 to 110 basis points (bps) (Vietnam) on a weighted average basis.

Management continued its active capital recycling activities, the latest being the divestment of five of its properties in Japan. The divestment gain of $8.5 million is expected to be distributed to unitholders over eight quarters from 1Q20.

As at 11.40am, units in MLT are trading at $1.47 or 19.7 times FY20 earnings with a distribution yield of 5.4%.

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