• 3QFY22 DPU rose 5.8% YoY to 2.185 S cents
• Positive rental reversions of 2.5%
• Guiding for SGD200-400m of potential divestments over next 12 months
3QFY22 results in-line with expectations – Mapletree Logistics Trust’s (MLT) 3QFY22 results met our expectations, with gross revenue and NPI increasing by 19.3% and 17.4% YoY to SGD166.9m and SGD146.4m, respectively. DPU rose 5.8% YoY to 2.185 S cents, such that 9MFY22 DPU grew 5.7% to 6.519 S cents and constituted 75.8% of our initial FY22 forecast. Growth was largely driven by organic growth and contribution from new acquisitions, coupled with lower rental rebates given to tenants.
Positive rental reversions of 2.5%; portfolio occupancy stable at 97.8% – MLT achieved overall portfolio rental reversions of 2.5% in 3QFY22, and this was a steady improvement from 1QFY22 (+2.2%) and 2QFY22 (+2.4%). MLT’s portfolio occupancy stood at 97.8%, and has remained unchanged for three consecutive quarters. The slight QoQ occupancy increases in Japan (+0.5 percentage points (ppt) QoQ to 96.7%), Hong Kong (+0.2 ppt to 99.9%) and South Korea (+0.4 ppt to 98.8%) was offset by a decline in Malaysia (-0.9 ppt to 99.1%). Full occupancy was achieved in Vietnam and Australia.
Targeting more acquisitions ahead – Looking ahead, MLT remains sanguine on the outlook of the logistics sector, and believes there is further room to deepen its presence in existing markets or even penetrate into new countries in Asia-Pacific. In terms of financial position, MLT’s aggregate leverage ratio declined from 38.2% (30 Sep 2021) to 34.7%, as its equity fund raising exercise was completed ahead of the completion of its acquisitions, which means aggregate leverage should increase again in 4QFY22 to ~39%. 79% of its borrowings have been fixed/hedged. Management guided that it was looking at potential divestments of ~SGD200-400m over the next 12 months, and is prepared to push its gearing slightly above 40% should inorganic growth opportunities arise. It is also ready to pursue a strategy of acquiring more un-stabilised assets in markets where it has an established presence, on the view that it will be able to ramp up the property’s occupancy to ~90% within 12 months of purchase. We incorporate MLTs recent acquisitions in our model, and also ascribe a slight ESG valuation discount given MLT’s recent ESG rating downgrade. Consequently, our fair value estimate declines from SGD2.10 to SGD2.05.
ESG Updates
MLT’s ESG rating was downgraded by ESG Research in late Oct 2021. It had held on to the rating since Apr 2019 prior to the downgrade. MLT appears to lack detailed anti-corruption policies that extend to its suppliers, as well as audit of its ethics management system. Furthermore, MLT lags its global and home market peers in corporate governance practices. Although MLT employs energy efficiency initiatives, it lags peers in securing green building certification for a substantial portion of its portfolio. On the positive side, MLT’s employee turnover is significantly low, and could imply the strength of its talent management policies, such as career development programmes. BUY. (Research Team)