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Sizeable Acquisition Accompanied By Sizeable Equity Fund

  • The proposed acquisition of 17 modern Grade-A logistics properties in China, Vietnam and Japan at a total acquisition cost of S$1,467.5m is massive, much larger than MLT’s previous acquisitions.
  • The portfolio includes seven logistics properties in China that are still undergoing stabilisation, whereby in-place rents and occupancy rates are below current market levels.
  • Maintain HOLD. Target price: S$2.08. The sizeable equity fund raising could put unit price under pressure.
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The proposed acquisition of 17 modern Grade-A logistics properties in China, Vietnam and Japan at a total acquisition cost of S$1,467.5m is massive, much larger than MLT’s previous acquisitions. The portfolio includes seven logistics properties in China that are still undergoing stabilisation, whereby in-place rents and occupancy rates are below current market levels. The sizeable equity fund raising could put unit price under pressure. Maintain HOLD. Target price: S$2.08.

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WHAT’S NEW

• Mapletree Logistics Trust (MLT) has proposed to acquire 17 modern Grade-A logistics properties in China, Vietnam and Japan at a total acquisition cost of S$1,467.5m.

• Tapping the large and growing consumption market in China. MLT has proposed to acquire 13 high-quality and modern logistics facilities built to Grade-A specifications in China with an agreed property value at Rmb4,111.7m (S$870.0m). China is an attractive logistics market due to the expansion of the middle class population and rising e-commerce adoption, which drives higher demand for logistics space. There is also a scarcity of Grade-A warehouses in China. The acquisition adds three new provinces to MLT’s geographical coverage and expands its network to 43 assets in 29 cities.

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• Income support for China properties. Seven of the logistics properties in China are newly completed and still undergoing stabilisation, thus operating below current market levels in terms of in-place rents and occupancy rates. Mapletree Overseas Holdings will provide income support of Rmb20.9m (S$4.4m) over the 12 months after the completion of the acquisition to ensure that the logistics properties in China provide net property income (NPI) of Rmb196.5m (S$41.6m).

• Vietnam benefits from the China plus One strategy. MLT has proposed to acquire three high-quality and modern logistics facilities built to Grade-A specifications in Vietnam with an agreed property value at US$95.9m (S$129.9m). Vietnam is a beneficiary of the structural trend of supply chain diversification. It benefits from strong inflow of foreign investment and manufacturing projects, which underpin and drive demand for logistics space. The three logistics properties are located in the provinces of Bac Ninh and Binh Duong, which serve Hanoi and Ho Chi Minh City respectively.

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• Key tenants for the China and Vietnam logistics properties include global third-party logistics (3PL) such as DHL and Damco (Maersk) and fast growing regional 3PLs like SF Express and Best. The NPI yield for the logistics properties in China and Vietnam is 5.1%.

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