Mapletree Logistics Trust's DPU could grow 3% by 2020: analyst

Its $1.56b acquisitions in 2018 could yield 6.3%.

Mapletree Logistics Trust (MLT) is projected to deliver a 2-3% growth in distribution per unit (DPU) driven mainly from acquisitions whilst its growth profile may continue to stabilise from dissipating risks from its key market in Singapore, according to a report by DBS Equity Research.

MLT closed an estimated $1.56b in new acquisitions over 2018, raising $500m in the process, the report revealed. The firm bought three logistics properties in Vietnam, Korea and Australia for a collective $191.6m which implies a blended yield of 6.3%.

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“These acquisitions are expected to be funded by debt, bringing its gearing close to 38.5% by the end of Q4, which is optimal in our view.” DBS’ analysts said in the report. “We have assumed $300m of acquisitions by the end of FY20, funded 50% by equity, lifting DPUs further in the medium term.”

Likewise, deals in Hong Kong, China and Singapore are reported to be value-accretive and will sharpen the REIT’s focus in key markets overseas that will offer further stability.

“We see a sizeable and growing pipeline of development properties which are approaching maturity that could be injected in the medium term,” analysts highlighted. “Given supportive capital markets, MLT has the ability to enter into earnings accretive acquisitions.”

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According to the analysts, the worst is almost over for MLT as Singapore’s logistics sector which makes up approximately 40% of the firm’s revenues will see minimal supply completions from 2018 onwards. The warehouse subsector is projected to approach a cyclical bottom by the end of 2018 and new supply may start tapering off significantly going into 2019.

“Whilst the supply of new warehouse space remains high, we see risk of oversupply abating in the medium term from 2018 onwards which will provide a support to rents,” analysts explained. “Recent positive numbers coming out of Singapore’s industrial production, if sustained, could mean that the slack in vacancy rates would be absorbed from 2018 onwards.”

Meanwhile, interest rates are likely to have minimal impact for MLT given that a majority of MLT’s loans are in foreign currencies, of which a substantial amount is denominated in JPY.