While most analysts are generally bullish on Mapletree Logistics Trust (MLT), following its positive 1QFY20/21 results announcement, UOB Kay Hian does not share similar sentiments as it is downgrading its call on MLT to “hold” from “buy” with a target price of $2.08 and an entry price of $1.88.

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

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

In a July 22 report, lead analyst Jonathan Koh says that downgrade is mainly because MLT’s unit price has rallied some 17.2% YTD and further upside is limited. Also, FY21 distribution yield has compressed to 4.1%.

Nonetheless, all of MLT’s tenants have resumed operations, except for 1.3% of revenue base, while Covid-19 has accelerated e-commerce growth and supply chain diversification, which has a positive impact on demand for logistics space.

Hence, management estimates rental rebates and deferrals at $5-10 million for FY21. It has already provided $4 million in rental rebates and $1.7 million in rental deferrals in 1QFY21.

With the market currently flushed with liquidity and many private equity funds are chasing deals. This has resulted in a divergence between rents and capital values, which causes compression in cap rates, especially in China.

Fortunately, the analyst believes that MLT could tap on its sponsor pipeline for acquisitions in Vietnam, Malaysia and China.

Even with acquisition opportunities, the management is likely to also maintain a stable distribution. The trust’s manager has said that it does not see the need to withhold distribution.

As it is, it is in a strong cash position f $244.6 million and has more than $530 million of available committed credit facilities, which is more than sufficient to refinance debt of $139 million due in FY21 and $217 million due in FY22.

As at 12.45pm, units in MLT are trading at $2.11 or 1.7 times FY21 book.