SINGAPORE (July 11): OCBC continues to rate Mapletree Logistics Trust at “hold”, raising its fair value estimate on the counter to $1.15 from $1.14 given its stronger balance sheet and improved outlook of Singapore's REIT sector.
This comes after the trust’s recent announcement of its intention to divest two of its freehold properties in Japan, Zama Centre and Shiroishi Centre for a consideration of $165.4 million.
See: Mapletree Logistics Trust to divest 2 Japan properties for $165 mil
In a Tuesday report, lead analyst Andy Wong says the deal translates into an exit Net Property Income (NPI) yield of about 4.3% as well as an attractive premium of 32% and 10% above the properties’ latest combined valuation and purchase price of JPY10.2 billion ($123.8 million) and JPY12.3 billion, respectively.
The trust expects to recognise a divestment gain of about JPY234 million ($2.9 million) -- excluding taxes and transaction-related expenses -- over the original purchase cost, which will be distributed to unitholders thereafter.
Noting the management’s active acquisition and portfolio rejuvenating strategy over FY17, Wong also highlights the MLT’s proactive approach in managing its single-user asset (SUA) leases, which he believes would mitigate risks should the SUA leases be converted to multi-tenanted buildings.
See also: Suntec REIT biggest beneficiary from MAS’s ‘looser’ leverage, ICR rules: OCBC
“We factor in MLT’s Japan divestments in our model, and assume that the net proceeds would be largely used to pare down its existing debt. We also increase our occupancy assumptions for some of MLT’s properties,” says Wong.
“Nevertheless, we are maintaining our ‘hold’ rating on MLT as we believe its solid execution capabilities as highlighted earlier and positives have already been priced in by the market,” concludes the analyst.
As at 10.10am, units of MLT are trading flat at $1.19.
