Riding the renewables wave
Logistics play with an ESG touch
MLT scores 58 under our expanded ESG 2.0 methodology, above the average of 50. MLT has executed well on solar energy adoption, green financing and waste recycling. It’s working towards a more comprehensive framework to achieve carbon neutrality by 2030. Nonetheless, disclosures on interim targets could improve its score further. Maintain BUY and DDMbased TP of SGD2.15 (COE: 6.1%, LTG: 2.0%). Maintain BUY.
Ready for a closer look
2021 was a milestone year in MLT’s ESG course, in our view – inaugural submission to GRESB review, introducing new material matters and targets. We also note two new markets (China and Malaysia) came under MLT’s disclosure scope in FY21. New initiatives such as green lease and accelerated green certification are expected in FY23. MLT is conceptualizing a green building certification roadmap and has committed to adding 25% green certified GFA in FY23 (from FY22 baseline). Overall, MLT scores well in our ESG 2.0 review. While MLT is working towards net zero for Scope 1 and 2 emissions by 2030, more ambitious interim targets on energy intensity reduction could drive a higher score.
Strong exposure to renewable energy
MLT stands out to us with the highest percentage of renewable energy generated and used among industrial S-REITs. In FY22, MLT generated 13.9m kWh of electricity, equivalent to 6109 tCO2e. Notably MLT consumed 5.8m kWh of solar generated, and sold the excess to the grid, against the backdrop of utility rate hikes. We expect MLT to deepen its commitments, with targets set to double the capacity by 2030.
Prudent capital management
MLT’s gearing stands at 37.2% as of 1H22 (vs. 36.8% in 1Q22), with an estimated debt headroom of SGD0.7b at 40% limit. Cost of borrowing is low at 2.3% compared to peers, while 80% borrowing is on fixed rate. Meanwhile, MLT has successfully extended its inaugural sustainability-linked loan which is pegged to its rooftop solar installation programme. The aggregate green financing instruments of SGD800m now account for 16.1% of MLT’s total borrowing.
