Analysts are overall positive on Mapletree Logistics Trust’s (MLT) proposed acquisition of a portfolio of properties from its sponsor Mapletree Investments for $1.04 billion, announced on Oct 19. MLT is proposing to acquire a 100% interest in seven properties in China, and the remaining 50% interest in 15 properties in China that it already owns. The REIT is also proposing to acquire one property in Malaysia and one in Vietnam.
The sale price represents a 1.7% discount to the agreed property value by an independent valuer appointed by the REIT’s trustees. Including expenses, the total acquisition cost is expected to be $1.09 billion. The acquisitions are expected to add 1.3% to DPU on a pro forma basis raising it to 8.25 cents, and 6.6% to NAV taking it to $1.28.
See: Mapletree Logistics Trust plans DPU and NAV accretive acquisition for $1.04 billion
The acquisitions are likely to be funded by a combination of debt and equity fund raising (EFR) comprising of a private placement and preferential EFR. On Oct 20, MLT announced that it is seeking to raise $650.0 million in gross proceeds through an EFR of new units in the trust.
The fund raising will be done through a private placement of between 222.0 million to 228.1 million new units at an issue price of between $1.973 and $2.027 per new unit to raise gross proceeds of $450.0 million.
The private placement is subject to an upsize option to issue up to 25.3 million additional new units to raise additional proceeds of up to $50.0 million.
Another $150.0 million will be raised through a non-renounceable preferential offering of up to 76.2 million new units at an issue price of $1.94 and $1.99 per new unit.
See: Mapletree Logistics Trust to raise $650.0 mil through equity fund
Along with its proposed acquisition announcement, MLT announced its 2QFY2021 results, which saw DPU increase by 1.5% y-o-y to 2.055 cents, bringing 1HFY2021 DPU to 4.1 cents, 1.2 % higher than a year ago.
For the quarter, amount distributable to unitholders increased by 6.2% y-o-y to $78.3 million across 6.5 million units, compared to 5.4 million units last year. Gross revenue also increased by 8.2% y-o-y to $131.9 million.
See: Mapletree Logistics Trust posts 1.5% rise in DPU to 2.055 cents
On the back of these announcements, Maybank Kim Eng is reiterating its “buy” recommendation on MLT with a target price of $2.40.
MLT is scaling up again on its higher-growth China, Malaysia, and Vietnam portfolio, with its latest acquisition, NLA should be raised by 24.2% and AUM by 11.5%, according to analyst Chua Su Tye in an Oct 20 report.
“We expect tight supply and positive demand-led fundamentals to drive medium term rental growth, whilst strengthening MLT’s network connectivity, as post-deal, its multilocation tenants would rise to 42% of its gross revenue, from 25% in 2015,” says Chua.
“Beyond the 1.3% DPU and 6.6% NAV boost, rising ecommerce demand and pandemic-induced supply chain diversification plans should underpin the assets’ long term growth upside,” adds Chua.
CGS-CIMB Research is also positive on MLT, albeit keeping its “hold” call, but with a higher target price of $2.05 from $1.89 previously.
MLT managed to clock in positive results for 2QFY2021, with DPU increasing thanks to better gross revenue and distributable income. The better performance was due to higher contributions from existing properties, accretive acquisitions and income from the recently completed Ouluo P2 redevelopment in China.
The trust’s portfolio also saw a slight q-o-q uptick in occupancy to 97.5% during the quarter. In terms of operations, there was positive rental reversions of 1.5% coming from Hong Kong, Japan, China and Vietnam properties. The trust also has a remaining 11.3% and 24.8% of rental income to be renewed in 2HFY2021 and FY2022 and management expects rental reversion to continue to stay in positive territory.
Meanwhile, on the acquisition, lead analyst Lock Mun Yee says, “Post-acquisition, MLT’s portfolio AUM would increase to $10 billion and enable the trust to further strengthen its connectivity across key logistics nodes and strengthen its supply chain resiliency as well as diversify its tenant base with an estimated 58% of its tenants involved in e-commerce.”
“Furthermore, management guided that it is continuing to explore third-party acquisition opportunities, particularly in Australia, Korea, Malaysia, Vietnam and Japan. We anticipate that the trust would be able to conclude more acquisitions in the short- to medium-term. In addition, with greater debt headroom capacity, we believe any further new purchases would likely be accretive,” she adds in an Oct 20 report, while commenting that she likes the stock for its pan-Asian logistics asset focus.
As at 11.45am, units in MLT are trading at $2.08 or 1.7 times FY21 book with a dividend yield of 4.02%, according to CGS-CIMB's estimates.
