PhillipCapital is positive on the overall outlook for Mapletree Logistics Trust (MLT) and has kept its “overweight” rating on the MLTSP 4.18% Perp Corp (SGD) with a yield to call of 3.15% and yield to worst of 3.08%.
Meanwhile, it rates “neutral” on the MLTSP 3.65% Perp Corp (SGD) with YTC of 3.31% and YTW of 2.76%.
In its latest 1Q20 results, MLT’s distribution per unit (DPU) increased y 1.0% y-o-y to 2.045 cents, while revenue grew 10.5% y-o-y to $132.4 million, on existing portfolio and new acquisitions, offset by rental rebates to eligible Covid-19 impacted tenants and divested investment properties.
EBIT grew 17.6% to $96.3 million on higher revenues and EBIT margins of 72.7%, up 4.4%. Average rental reversion was positive 1.9% for the quarter, mainly due to properties in China, Hong Kong SAR, Malaysia and Vietnam. Leasing demand for warehouse space remain resilient amidst Covid-19 and 98.7% of MLT’s tenants in terms of total revenue have resumed operations, except of 1.3% mainly from Singapore. The group has hedged 78% of revenues to SGD.
See: MLT posts 1% increase in 1Q DPU to 2.045 cents
As at June 2020, MLT’s portfolio consists of 145 properties with a total asset under management (AUM) value of $8.9 billion. Portfolio occupancy stood at a healthy 97.2%, while weighted average lease expiry (WALE) of the portfolio (by NLA) is unchanged at 4.3 years.
In a September 7 report, analyst Timothy Ang says, “Our stress tests show investment property values can fall by 22% or borrowings increased by $1 billion or 30% before the MAS gearing limit is breached. Also, MLT has sufficient committed credit facilities of $530 million to pay off all short-term debt.”
Debt maturity profile is well staggered with 10% maturing in the next two years and an average debt duration of four years. In the quarter, MLT refinanced $127 million equivalent of HKD and AUD loans with existing committed credit facilities. As a result, short-term debt declined to $129 million q-o-q from $202 million. 80% of total debt has been hedged to fixed rates, with the weighted average annualised interest rate at 2.3%.
MLT’s borrowing costs may have increased by 6.5% y-o-y from net debt issuance of $86 million in the quarter for acquisitions, but interest cover ratio including perpetual bond payments remained healthy at 3.6 times.
On the outlook, MLT’s performance remained resilient despite Covid-19. It is also rated investment grade Baa2 with a stable outlook by Moody’s.
“With a debt headroom of $1 billion based on the MAS gearing limit of 50%, MLT has room for more growth through acquisitions. A proposed acquisition of a Grade A logistics facility in Brisbane Australia for $20.2 million is expected to complete and begin contributions in 3Q21,” says Ang.
As at 11.03am, units in MLT are trading at $2.06.