Refocus on extracting portfolio value
- DPU of 8.787 Scts a commendable c.5.5% rise
- Robust NAV uplift as cap rate compresses in a number of key markets; stock is now at 1.2x P/NAV
- Operational outlook stable; keep an eye on China given its economic stress from the COVID-19 wave
- Maintain BUY, TP reduced to S$2.05 on higher discount rate assumptions
Investment Thesis:
Maintain BUY, TP of S$2.05. We remain positive on Mapletree Logistics Trust (MLT) for its earnings resilience with potential upside (organic and inorganic) as it rides on the robust fundamentals for logistics properties post COVID. Our target price is adjusted to S$2.05 to account for higher discount rate assumption.
Resilient operations; China focus. MLT’s portfolio has remained stable with most major geographies maintaining a high occupancy rate of > 98% on positive rental reversions. That said, the manager is keeping a lookout in China where the supply outlook in selected Tier 2/3 cities and slowing growth trajectory owing to the current COVID-19 wave is a near term overhang.
Asset recycling a key value enhancing move. MLT has taken significant steps to anchor itself as one of the leading logistics solutions providers and with more than S$2.0bn worth of deals done in the past few years. While the manager remains keen to acquire, the competitive landscape has driven down yields and thus, the focus of FY23 is to look within its portfolio to drive value enhancement initiatives.
Valuation:
We maintain our BUY recommendation with TP of S$2.05 on assumed acquisitions.
Where we differ:
We believe that MLT can deliver on more acquisitions which is not priced in by consensus.
Key Risks to Our View:
Acquisitions ramping up faster than expected. A faster-than-projected acquisition pace and/or a better-than-expected outlook for the Singapore/China warehouse market.