SINGAPORE (Dec 7): DBS Vickers Securities reiterates its “buy” call on Mapletree Logistics Trust (MLT) with a target price of $1.50, which is derived based on an assumed 3% risk free and 50bps higher funding costs than current levels.
The research house’s target price is notably above the consensus average of $1.35, as it believes the street has yet to factor in improved fundamentals post MLT’s recent acquisitions, nor the trust’s potential to surprise on the upside organically and through more acquisitions.
See: Mapletree Logistics Trust acquiring Seoul warehouses for $46 mil
See: MLT enters into sale-and-leaseback agreement for 5 local logistics properties worth $778.3 mil
“MLT, through its focus in key markets of Hong Kong, Singapore, Japan and Australia, offers stronger income visibility and growth than before,” says analyst Derek Tan in a Friday report.
“Coupled with a stronger balance sheet post recapitalisation, improving organic growth outlook and a myriad of acquisitions, we believe that the real estate investment trust’s (REIT) improved earnings prospects will translate into higher valuations going forward,” he adds.
As such, DBS has assumed $300 million of acquisitions by end-FY20, to be 50% funded by equity, which it believes consensus has not priced in yet.
It sees further opportunities from MLT’s sponsor, which has an extensive pipeline of acquisition opportunities in the research house’s view.
“Looking ahead, MLT is projected to deliver a 2-3% growth in DPU driven mainly from acquisitions, while its organic growth profile continue to see improved stability on the back of its dissipating supply risk from its key market in Singapore,” says Tan.
As at 4.30pm, units in MLT are trading flat at $1.28 or 17.2 times FY19F book value.
