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Analysts optimistic on MLT on resilient 1Q results, positive outlook

Samantha Chiew
Samantha Chiew7/22/2020 11:12 AM GMT+08  • 4 min read
Analysts optimistic on MLT on resilient 1Q results, positive outlook
Covid-19 is spurring the growth of e-commerce and analysts believe that MLT will be a key beneficiary
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SINGAPORE (July 22): Analysts are bullish on Mapletree Logistics Trust (MLT) after it announced a rather positive 1QFY20/21 results on Monday with DPU increasing by 1.0% y-o-y to 2.045 cents, while gross revenue and net property income increased by 10.5% and 12.0% to $132.4 million and $118.8 million, respectively.

This was all thanks to organic rental growth, contributions from new acquisitions, and lower property expenses, albeit partly offset by rental rebates granted to eligible tenants and divestment of six properties in FY20.

See: MLT posts 1% increase in 1Q DPU to 2.045 cents

Maybank Kim Eng has a “buy” call on MLT with an increased target price of $2.25 from $2.10 previously.

Leasing activity was strong with 326,000 sqm 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 its tenants have resumed operations except for 1.3% of its revenue base.

Meanwhile, demand for leasing space continues to be driven by e-commerce tenancies which now contribute 25-30% of MLT’s revenue, up from 15% five years earlier. Occupancies and rents in Malaysia and Vietnam are expected to be underpinned by its tenants’ supply chain diversification strategies.

In a Tuesday report, analyst Chua Su Tye says, “We raised FY21 DPU (by 2%) and expect its occupancies to remain resilient on steady demand growth. MLT’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.”

Sharing similar sentiments, DBS Group Research is also keeping its “buy” recommendation on MLT with an increased target price of $2.20 from $2.05 previously.

In a Wednesday report, lead analyst Derek Tan says, “We remain positive on MLT and expect the share price to reach new highs. We see MLT to continue riding on the robust demand for logistics properties supporting the accelerated adoption of ecommerce post Covid-19. With supportive structural tailwinds in place, we believe MLT remains well placed to also acquire accretively.”

Additionally, a coordinated response from the Singapore government to infuse liquidity and support businesses mitigates downside risks for MLT’s Singapore exposure, which contributes some 35% of revenues.

Looking ahead, with about 75% of MLT’s revenues focused on the consumer-related sector (of which 25-30% is in the e-commerce space), Tan anticipates MLT to see accelerating demand riding on the back of increased consumer adoption of e-commerce sales in the longer term.

On the other hand, CGS-CIMB is reiterating its “hold” call on MLT with a higher target price of $1.89 from $1.70.

In a Tuesday report, analyst Lock Mun Yee also raises FY21-23 DPU estimates by 0.1-3.1% to factor in contributions from MLT’s recent Australian acquisition and lower interest cost.

In June, MLT purchased a logistics property in Brisbane, Australia for $21.25 million, to be fully funded by debt. The property is 100% leased to Decina, Australia’s largest specialist bath, space and shower manufacturer, for 10 years, with annual rental escalation.

Meanwhile, MLT continues to explore portfolio rejuvenation possibilities for its existing portfolio, and highlighted that a number of its properties in Singapore, Malaysia, Korea and Japan, totalling some $500 million, have asset enhancement potential. The potential positive impact have not been reflected in the analyst’s current estimates.

In addition, MLT says that it will continue to explore new acquisition opportunities.

“We anticipate the potential asset enhancement initiatives (AEIs) within its existing portfolio would likely catalyse its share price in the medium term. In addition, MLT continues to offer strong income visibility as 78% of its distributable income is hedged/sourced in SGD,” adds Lock.

OCBC Investment Research also has a “hold” call on Mapletree Logistics Trust (MLT) with a higher fair value estimate of $2.07 from $1.79 previously.

See: 'Hold' MLT as it remains resilient and is key beneficiary of e-commerce growth

As at 11.05am, units in MLT are trading at $2.02 or 1.5 times FY20/21 book value with a DPU yield of 4.0% according to Maybank Kim Eng’s estimates.

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