A resilient performance
? 4Q/FY22 DPU of 2.268/8.787 Scts were slightly ahead of expectations, at 26.7%/101.8% of our FY22 forecast
? Achieved rental reversion of +2.9% in 4Q
? Reiterate Add with an unchanged TP of S$2.10
4Q/FY22 results highlights
MLT reported a 16.5%/14.9% yoy rise in 4QFY3/22 gross revenue/NPI to S$182.9m/S$157.1m, thanks to better operating performance from its existing assets, contributions from new acquisitions, and lower tenant rental reliefs. 4Q DPU grew 5% yoy to 2.268 Scts. FY3/22 DPU of 8.787.52 Scts was 5.5% higher yoy. MLT recognised a S$565m revaluation gain in its portfolio, lifting BV/unit to S$1.48.
Slight dip in portfolio occupancy but reversions remain positive
MLT’s portfolio occupancy dipped slightly qoq to 96.7% as at end-4Q, dragged down by lower occupancies in Singapore, South Korea and China. There were positive rental reversions across its geographical footprint, with the most uplift from Vietnam, China, India and South Korea; overall rental reversion was +2.9%. The trust has leases accounting for 29.9% and 20.5% of its rental income to be renewed in FY23F and in FY24F, respectively. Management highlighted that the positive reversion trend will likely remain intact, with leasing in Singapore remaining stable due to demand from e-commerce and business inventory stockpiling while HK continues to benefit from favourable supply-demand dynamics. Meanwhile, tenants in China are more cautious about business expansion due to macro uncertainties, it noted. Contributions from its recently-completed acquisition of the Baeksa Logistics Centre in South Korea should also boost FY23F earnings.
Exploring inorganic growth for better returns
In terms of inorganic growth outlook, MLT intends to undertake asset enhancement opportunities, in Singapore as well as overseas. MLT estimates that its portfolio could have potential for c.S$500m worth of redevelopment/asset enhancement opportunities. To partly fund these activities, MLT is also looking at potentially more asset divestments to recycle its capital. MLT’s gearing stood at 36.8% at end-4Q, 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. MLT also guided that it is less likely to be negatively impacted by rising utilities cost as utilities expenses account for <5% of its opex.
Reiterate Add rating
Following its results, we tweak up our FY23-24F DPU by 1.42% and maintain our DDMbased TP at S$2.10. Our current forecasts have not baked in any pre-emptive new acquisitions or redevelopment/asset enhancement opportunities as guided by management. Potential re-rating catalysts: more accretive acquisitions. Downside risk: slow macro outlook that would hamper rental growth outlook.