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Delivering AUM Growth

Adding SGD1.4b assets in China, Vietnam and Japan

MLT’s acquisitions have picked up pace post-1H22, as it added 17 Grade A logistics assets (average age of 1.6 years) in China, Vietnam and Japan for c.SGD1.4b, which are set to boost its NLA by 18.3% and AUM by 13.5% to SGD12.2b. While DPU accretion is low at c.1%, the assets are backed by strong fundamentals, with upside to rents and valuations in the medium term, underpinned by tight supply. We will revise our estimates and DDMbased SGD2.35 TP (COE: 5.7%, LTG: 2.0%) pending deal closure. Its balance sheet is strong, and while SGD1.8b in deals announced YTD exceeds the c.SGD1.6b in FY21, management is eyeing more. BUY.

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The portfolio of 16 sponsored assets – 13 in China and 3 in Vietnam – are Grade A, modern logistics facilities, with an average age of 1.5 years, committed occupancy of 91.0%, and a 2.9-year WALE (by NLA). 82% of occupiers serve the consumer markets and 30% of these are new (by gross revenue). A 12-month rental support embedded in the 5.1% NPI yield valuation should help cushion DPU as occupancies ramp up to 95-100%. The 43% jump in its China NLA should strengthen network benefits as 57% of its tenants are leasing space in more than one asset, up from 44% currently. Also, tighter c.4% market cap rates suggest potential for divestment gains in the medium term. MLT now has 43 assets in China, up from 30, and it enters into three new provinces.

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Largest asset in Japan to deepen market AUM

The third-party acquisition, at SGD403.8m and c.4.0% stabilised NPI yield, is MLT’s 19th and largest logistics facility in Japan by NLA and value. It is its third asset in Greater Nagoya, the country’s largest manufacturing hub, with its industry representing c.25% of 2019 shipment value. It is well-sited within an established industrial and logistics cluster with high connectivity to the port and airport, and Greater Osaka and Tokyo. Demand from 3PLs remains strong, against tight supply of large modern warehouse space, and management expects occupancy to improve to 100% in the next 12 months.

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MLT eyeing 2.2%/4.4% DPU/NAV accretion

MLT is eyeing 2.2% DPU and 4.4% NAV accretion for the transactions, as it raises SGD700m in new equity, but we expect this could be lower at c.1% given the SGD1.82-1.91 pricing range (versus an illustrative SGD1.92 unit value). We expect gearing to stay at 39.0% post-deal, with an estimated SGD1.9b in debt headroom (at 45% limit). Management sees a strong deal flow to 4Q22 from third-party assets, as it awaits regulatory approval for its proposed SGD250m fourth redevelopment project in Singapore.

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