Mapletree Logistics Trust – Unphased by the pandemic September 7, 2020 158

  • Revenues rose 10.5% YoY to S$132.4mn, EBIT grew 17.6% YoY to S$96.3mn on higher margins of 72.7%, up 4.4%.
  • Gearing (D/A) including perpetuals remained stable, up 0.3% to 42.9% despite net debt issuance. Borrowing cost rose 6.5% QoQ on higher borrowings for acquisitions.
  • Occupancies remained healthy at 97.2% from 98.0% previous quarter, and rental reversions was positive 1.9%, vs 2.0% previous quarter.
  • We are Overweight on the MLTSP 4.18% Perp Corp (SGD) with a yield to call of 3.15% and yield to worst of 3.08%, and Neutral on the MLTSP 3.65% Perp Corp (SGD) with YTC of 3.31% and YTW of 2.76%.

 

The Positives

+ Revenue rose 10.5% YoY to S$132.4mn on existing portfolio and new acquisitions, offset by rental rebates to eligible COVID-19 impacted tenants and divested investment properties. EBIT grew 17.6% to S$96.3mn on higher revenues and EBIT margins of 72.7%, up 4.4%. Average rental reversion was positive 1.9% for the quarter, mainly due to properties in China, Hong Kong SAR, Malaysia and Vietnam. Leasing demand for warehouse space remain resilient amidst COVID-19 and 98.7% of MLT’s tenants in terms of total revenue have resumed operations, except of 1.3% mainly from Singapore. The group has hedged 78% of revenues to SGD.

 

+ Portfolio occupancy remained healthy ay 97.2%. WALE stood at 4.3 years and is well-staggered with 15.6% and 24.2% of leases by NLA expiring in the next 2 years respectively.

 

+ Adequate aggregate leverage of 39.6%. Our stress tests show investment property values can fall by 22% or borrowings increased by S$1bn or 30% before the MAS gearing limit is breached. Also, MLT has sufficient committed credit facilities of S$530mn to pay off all short-term debt.

Debt maturity profile is well staggered with 10% maturing in the next 2 years and an average debt duration of 4 years. In the quarter, MLT refinanced S$127mn equivalent of HKD and AUD loans with existing committed credit facilities. As a result, short-term debt declined to S$129mn QoQ from S$202mn. 80% of total debt has been hedged to fixed rates, with the weighted average annualised interest rate at 2.3%.

 

The Negatives

– Borrowing costs increased 6.5% from net debt issuance of S$86mn in the quarter for acquisitions. Interest cover ratio including perpetual bond payments remained healthy at 3.6x.

 

Outlook

MLT’s performance remained resilient despite COVID-19. With a debt headroom of S$1bn based on the MAS gearing limit of 50%, MLT has room for more growth through acquisitions. A proposed acquisition of a Grade A logistics facility in Brisbane Australia for S$20.2mn is expected to complete and begin contributions in 3Q21. MLT is rated investment grade Baa2 with a stable outlook by Moody’s.

 

Bond Recommendation

On the Mapletree curve, we are Overweight on the MLTSP 4.18% Perp Corp (SGD) with a yield to call of 3.15% and yield to worst of 3.08%. and Neutral on the MLTSP 3.65% Perp Corp (SGD) with YTC of 3.31% and YTW of 2.76%.

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Timothy Ang
Research Analyst
Phillip Securities Research

Timothy covers credit analysis of local and foreign bonds. Previously an equity dealer, he handled equity trade execution and portfolio management. He has presented seminars for organisations such as SIAS, SPH and IRAS, commentated live market updates for 93.8FM, and authored investment articles for the Business Times newspaper. He graduated with a Bachelor of Commerce in Accounting & Finance from the University of Western Australia.

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