Still active on inorganic growth
? 3Q/9MFY3/22 DPU is line, at 25.3%/75.5% of our FY22F forecast.
? Income growth from positive reversions and accretive acquisitions.
? Upgrade to Add from Hold, with a DDM-based TP of S$2.10.
3QFY3/22 results highlights
MLT reported a 5.8% yoy rise in 3QFY3/22 DPU of 2.185 Scts, thanks to a 19.3% yoy improvement in gross revenue w ith higher contributions from existing properties, lower tenant rebates and acquisitions in South Korea, Australia and Japan; partly offset by higher property expenses and increased borrowing costs. There were also lower divestment gains of S$1.8m in 3QFY22 vs. S$4.7m in 3QFY21. For 9M, DPU of 6.52 Scts, +5.7% yoy made up 75.5% of our FY22F projections.
Another quarter of positive rental reversion
MLT’s portfolio occupancy held steady qoq at 97.8% as at end-3Q, lifted by higher occupancies in Japan, South Korea and HK SAR. There were positive rental reversions of 2.5% coming across its geographic footprint, with the most uplift from Vietnam, Malaysia, South Korea and Japan. The trust has a remaining 8.7% and 29.5% of rental income to be renewed in 4QFY22F and in FY23F, respectively. Management highlighted that tenant demand remains robust and the positive reversion trend will likely remain intact. In addition, acquisition of 15 out of the 16 properties in China and Vietnam, announced in Nov 21, has
been completed in Jan 2022 and contribution from these new assets as well as the Kuwana Logistics Centre in Japan, should be felt in the coming quarters.
Tapping into redevelopment or asset enhancement opportunities
In terms of outlook, MLT expects the logistics warehouse sector to remain robust and expects its portfolio to remain resilient given its diversified geographic footprint and tenant base. While it continues to pursue inorganic growth strategy, the more competitive landscape would mean that MLT would likely have to tap into pre-stabilised assets that offer higher yield or undertake asset enhancement opportunities, in Singapore as well as overseas. MLT estimates that its portfolio could have potential for c.S$500m w orth of redevelopment/asset enhancement opportunities. To partly fund these activities, MLT is also looking at potentially more asset divestments to recycle capital. MLT’s gearing stands at 34.7% at end-3Q and 79% of its debt are on fixed rates. It estimates that for every 25bp increase in funding cost, its DPU could be eroded by 0.01 Scts every quarter.
Upgrade to Add rating on valuation
Follow ing its results, we tweak our FY22F DPU down by 1.11% but lift our FY23-24F DPU estimates up by 0.26-0.69% to adjust for the recent equity fund raising exercise to fund the purchase of S$1.4bn worth of assets, announced in Nov 21. Accordingly, our DDM-based TP is adjusted down slightly to S$2.10. Our current forecast has not baked in any preemptive new acquisitions or redevelopment/asset enhancement opportunities guided by management. With the recent share price decline, MLT’s valuation looks more palatable at an FY22F dividend yield of c.5.1%. Hence, w e upgrade our rating to Add on valuation.
Upside risk: more accretive acquisitions. Downside risk: slow macro outlook that would hamper rental growth outlook.