SINGAPORE (June 21): OCBC Investment Research is maintaining its “buy” call on Mapletree Logistics Trust (MLT) with a lower fair value estimate of $1.34 compared to $1.44 previously, after raising its discount rate assumption to 8.2% from 7.8%.
This stems from OCBC adopting a more conservative stance on the REIT, in view of uncertainties and negative sentiment surrounding ongoing trade tensions between the US and China.
See: US protectionism and China deleveraging pace big worries for Asian stock investors: BlackRock
In a Thursday flash note, Andy Wong notes that US-China trade frictions have “undoubtedly spooked the equity markets” while also casting a pall over the outlook of global trade and, correspondingly, logistics-related securities.
Further, with MLT having recently completed its acquisition of a 50% interest in a portfolio of assets in China, Wong also highlights that China is expected to contribute 9% of MLT’s pro forma portfolio valuation and 11% of its pro forma FY18F as compared to 5% and 6% previously, respectively.
The trust derived 6.2% of its net property income (NPI) from China in FY18.
While Wong acknowledges this increased exposure may raise concerns amid the current trade spat, the analyst believes a significant portion of MLT’s underlying end-user revenue from China is derived domestically due to its fast-growing e-commerce sector, and hence will see limited impact of a trade war on its earnings.
“For example, JD.com’s business is primarily conducted in China. After taking into account the aforementioned acquisition and recent private placement exercise (gross proceeds of $220 million) to finance this purchase, we trim our FY19F DPU forecast by 0.9% and FY20F forecast by 0.8%,” says Wong.
As at 11.12am, units in MLT are trading 1.64% lower at $1.20.
