MLT secures 75% pre-commitment level for MBLH

Driven by healthy leasing demand.

Mapletree Benoi Logistics Hub, which is Mapletree Logistics Trust's first redevlopment project in Singapore, has been able to post healthy pre-commitment levels on the back of strong interest from major thrid-party logistics service providers, said OCBC Investment Research.

Here's more from OCBC:

Robust pre-commitment at MBLH. Mapletree Logistics Trust (MLT) announced that Menlo Worldwide Logistics, the subsidiary of NYSE-listed Con-way Inc, has signed a binding commitment to lease 48,700sqm at MLT’s Mapletree Benoi Logistics Hub (MBLH) for a period of 10 years. This agreement marks the latest expansion by Menlo in Singapore and lifts Menlo as MLT’s largest tenant (contributing 3.6% of MLT’s enlarged monthly gross revenue). Together with Menlo’s commitment which accounts for 55% of MBLH’s NLA, we understand the property is now 75% preleased, with the balance in the advanced stage of negotiation.

Background on MBLH. MBLH is MLT’s first redevelopment project in Singapore. Formerly known as 21/23 Benoi Sector, the property commenced the refurbishment in 2011 and is scheduled for completion in 4Q13. It is strategically located within the Jurong Industrial Estate and is in close proximity to Jurong Port and easily accessible via expressways. When completed, MBLH will be transformed into a modern five-storey ramp-up warehouse with significantly enhanced features such as floor loading capacity of up to 40kN/sqm and a clear height of up to 12m. Total GFA is expected to increase by four folds from 22,500sqm to 92,500sqm, based on an increased plot ratio from 1.4 to 2.5.

Maintain HOLD on valuation grounds. We are positive on this development as it reflects continued healthy leasing demand and strong interest from major third-party logistics service providers. Judging from the strong pre-commitment levels, we believe that MLT will be able to meet its estimated yield-on-cost of 8-9% (development cost of ~S$128m). In addition, we expect the long lease to further enhance MLT’s already resilient lease structure. We make no change to our forecasts as we have previously factored in the redevelopment project. MLT is currently offering a 6.5% current yield, which is relatively attractive in our view. However, as the stock appears to be fairly priced when compared to our fair value of S$1.15, we maintain HOLD on MLT.