SINGAPORE (Jan 9): DBS is maintaining its “buy” call on Mapletree Logistics Trust (MLT) with a target price of $1.38 following the trust’s latest acquisition.
MLT recently acquired the remaining 38% of a strata-titled logistics warehouse located in Shatin, Hong Kong called Shatin No.3.
See: MapletreeLog acquiring remaining 38% of HK warehouse in Shatin for $104 mil
The trust acquired the remaining stake for HK$610 million ($103.7 million).
In a Monday report, analyst Derek Tan says, “Based on our estimates, the price paid for the property implies an initial yield of close to 4%, in line with recent market transactions.”
Moreover, the consideration implies HK$4,613 psf, which is close to 30% higher than the valuation in its balance sheet of the existing 62% stake in Shatin No. 3 (HK$3,572 psf as at March 2017).
Hence, there is upside valuations and net asset value (NAV) in the upcoming results in March. The analyst also believes that this somewhat justifies the current 1.3 times P/NAV multiple that the trust currently trades at.
Hong Kong’s logistics market is currently tightly held and the trust’s manager believes that this is a rare opportunity to gain full control of a strata-titled asset.
This will give MLT the flexibility to add value through executing on a potential asset enhancement initiative to raise the property’s attributes, which in turn will raise yields and attract higher value tenants.
“This acquisition allows MLT to potentially boost the property’s capital value further in the medium term,” says Tan.
As at 12.06pm, units in MLT are trading at $1.35 or 18.3 times FY18 earnings with a distribution yield of 5.6%.
