• Mapletree Logistics Trust (MLT) fielded questions from its unitholders on its China and Hong Kong operations, given more subdued trading environment 
• Concerns are not new, with Manager guiding on China weakness 6-months ago while Hong Kong market conditions remain tight; that said, tenants have been renewing, keeping occupancies in the range of 93%-95%
• Other markets in Asia Pacific (Vietnam, Singapore, Malaysia and Australia), collectively driving c.56% of its net property income remain “robust”
• Logistics REITs attractive with MLT at P/B of 1.0x, 6.3% yield (- 1 standard deviation) with its peer FLCT, trading at c.7.3% yield (-1.5 standard deviation)  

What has happened
Mapletree Logistics Trust (MLT) fielded questions from its unitholders for their upcoming annual general meeting (“AGM”). Most of the questions received surrounded the trust’s exposure in China and Hong Kong collectively accounting for c.34% of NPI (c.16% and 18%, respectively) where operational challenges persists due to weak economic outlook exacerbated by an oversupply situation, especially in Tier 2 cities in China. We do note that the manager remains on a defensive stance for its leasing strategy, focusing on maintaining occupancies at its properties to protect cashflows and returns. As of 4Q24, China and Hong Kong occupancy rates <were at> c.93% -96%, above market levels. 

Our view 
The operational challenges especially for China (c.16% of net property income) were not new in our view and has been in topic of discussion between investors in recent quarters. In 4Q24, Management have previously guided that it would take 12month-15months for its China operations to base out and recover with MLT focusing on maintaining occupancies while rents are generally expected to drop c.15% (priced in) through the course of the upcoming financial year ending March25. Concerns on the resiliency of its operations in Hong Kong (c.18% of net property income) has recently emerged but we do note that performance is likely to be stable as market vacancy rates will likely have peaked and tenants are likely to continue renew and maintain their premises. In fact, the REIT’s other exposures (Vietnam, Singapore, Malaysia and Australia), collectively driving c.56% of its net property income remain on a growth trajectory, which we believe to mitigate the weakness in Hong Kong & China. In FY25, we estimate a c.7% decline in DPU (mainly on the back of (i) drop off in fair value gains distributions, (ii) slight weakness in JPY/SGD hedge rates, bringing our DPU to 8.3 Scts (-5% below consensus). Even then, stock is trading at c.6.3% (placing it amongst the amongst the highest the big 4 industrial S-REITs). Similarly there is good value in Frasers Logistics Trust (“FLCT”) at a yield of c.7.3% with updates on backfilling on the loss of main tenant Google (c.5.0% of revenues).