• Acquires a portfolio of logistics properties in Malaysia and Vietnam for S$226.3m
• Initial yield of 6.2%, funding to be a mix of debt and divestment proceeds, DPU accretive at an estimated 0.5%. 
• Post acquisition gearing is at an optimal level of 39.6% in the face of possible slight adjustment in capital values come financial year end Mar’24.
• A China + 1 logistics proxy, BUY, TP S$1.88 maintained.  

Mapletree logistics Trust (“MLT”) announced the acquisition of a portfolio of logistics properties located in Malaysia and Vietnam from sponsor for a total agreed property value of S$226.3m (S$234.0m post transaction cost). The properties are estimated at c.2.0% discount to valuations and at the acquisition price, implies an initial net property income (“NPI”) yield of 6.2%. The assets are multi-tenanted with an in-place occupancy rate of 96% and a weighted average lease expiry of 1.8 years. Funding of the deal is expected to be a mix of debt and proceeds from recent divestments, implying lesser need for equity. Overall gearing will inch higher towards c.39.6% (from 38.8%), within management comfortable level of c.40%.

Our view

The acquisition of a portfolio of modern logistics properties further pivots MLT to benefit from the robust demand for logistics properties within ASEAN with demand from 3PLs in Malaysia (5.7% yield) and Vietnam (7.5% yield) on the back of a broader China + 1 pivot strategy from multi-national companies and also growing demand within the domestic markets. While MLT is not intending to tap the equity market - though we have preferred that they do, the strategy to recycle capital and optimise returns  will be seen positively by investors. That said, a post deal gearing of c.39.6% and in anticipation of slight adjustment in asset values come year-end valuations in March’24, implies that the REIT is at its optimal capital structure, meaning that further debt-funded growth will likely to be more selective from now onwards. This acquisition is expected to be accretive to DPU by c.0.5%. Our estimates are unchanged for now , TP S$1.88 maintained. BUY!

ANALYST CERTIFICATION

The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate[1] does not serve as an officer of the issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or his associate does not have financial interests[2] in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the DBS Group.

COMPANY-SPECIFIC / REGULATORY DISCLOSURES

1. DBS Bank Ltd, DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS'') or their subsidiaries and/or other affiliates have a proprietary position in Mapletree Logistics Trust recommended in this report as of 31 Jan 2024.

2. DBS Bank Ltd, DBS HK, DBSVS, their subsidiaries and/or other affiliates have a net long position exceeding 0.5% of the total issued share capital in Mapletree Logistics Trust recommended in this report as of 31 Jan 2024.

Compensation for investment banking services:

3. DBS Bank Ltd, DBS HK, DBSVS their subsidiaries and/or other affiliates of DBSVUSA have received compensation, within the past 12 months for investment banking services from Mapletree Logistics Trust as of 31 Jan 2024.

4. DBS Bank Ltd, DBS HK, DBSVS, their subsidiaries and/or other affiliates of DBSVUSA have managed or co-managed a public offering of securities for Mapletree Logistics Trust in the past 12 months, as of 31 Jan 2024.

5. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

Directorship/trustee interests:

6. Judy LEE, a member of DBS Group Holdings Board of Directors, is a Director of Mapletree Logistics Trust as of 31 Dec 2023.

Disclosure of previous investment recommendation produced:

7. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12 months. Please contact the primary analyst listed on page 1 of this report to view previous investment recommendations published by DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates in the preceding 12 months.

[1] An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst. 

[2] Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis.  This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.