• Close to 9.0% dip in DPU is well expected and in line with expectations; core DPU came in flattish y/y
• Overall financial metrics resilient with active hedges in place to defend REIT’s balance sheet against economic slowdown
• Reversions generally positive at +2.6%; China recovery still a way out 
• BUY call TP 1.75 maintained. 

(+) Dip in 1QFY25 DPU well anticipated by market. Mapletree Logistics trust (“MLT”) reported 1QFY25 DPU of 2.068 Scts (-8.9% y/y, -6.5% q/q) which was in line with our estimates. This was boosted somewhat by S$5.7m in divestment gains (vs S$12.0m in 1QFY24). Stripping out divestment gains, DPU backed by core operations would have been flattish y/y at c.1.95 Scts.   In 1QFY25F, we saw a -0.3% and -0.9% dip in gross revenues and net property income to SGD 181.6 million and SGD 156.7 million respectively. The steady performance backed by steady occupancy rates at 95.7% and positive portfolio rental reversionary rates of 2.6%. This was further boosted from contribution from acquisitions, stronger organic growth in Singapore and Hong Kong, offset by divestments and the depreciation of the CNY, JPY against the SGD. On a constant currency basis, gross revenues and net property income would have risen by 2.1% y/y and 1.3% y/y respectively.

Our view

(+) Financial metrics stable despite rise in global rates. 

MAS leverage ratio remained stable at 39.6% (+ 0.7% ppt y/y), with (debt + perpetual) / asset ratio increased slightly to 44.0%, as the manager have took on more debt for acquisitions. While leverage is at the higher end of management historical ranges, we understand that the manager remains comfortable.  Overall interest cost remained resilient at 2.7% (+flat q/q and y/y). Despite the overall increase in interest rates, MLT was able to keep its overall interest burden within control through active management of the REIT’s expiry profile and debt currency mix. Looking ahead, management expects that overall cost of debt to rise still, as hedges roll off through 2025 but still remain within 3.0% (within our projections). 

We do note a slight dip in MLT’s T12M EBITDA adjusted interest coverage ratio (“ICR”) including perpetual interests, which fell to 2.9x (from 3.07x a quarter ago). Looking ahead, given the rise in interest rates offset by continued growth in cashflows, we expect that EBITDA ICR ratio is likely to remain close to current levels. 

(+) China operations of focus; overall portfolio metrics remain positive.   

We note a slight 0.3% q/q dip in occupancy rates to 95.7% but we note that dips seen in Singapore (95.8%) and Malaysia (c.97.7%) are likely to be transitory as backfilling of space is expected sometime in the coming quarter. We remain on close watch of the REIT’s China properties (c.20% of revenues) where rental reversions still remain weak but occupancy rate has held stable throughout the past few quarters at c.93.1%. We understand that the operating environment remain uncertain, especially for the REIT’s Tier 2 cities in China (c.9%-10% of revenues) where the current oversupply situation remains a key overhang. Rental reversions in China remain weak with the manager seeing rental declines to the tune of c.20% which will likely continue in the coming 6 – 12 months. That said, we remain comforted that the REIT’s China warehouses in Tier 1 cities see stable performance.  

While MLT overall rental reversions remained at a positive 2.6% (vs 2.9% in 4QFY24), we note that China’s performance remains the one to watch at -11.3% (offset by robust uplifts in Singapore  (+7.8%) while other cities remained positive – Malaysia (+3.1%), Vietnam (+4.3%) with general positive reversionary trend for most cities. 

(+) Active asset and capital management the key to success 

MLT continues to diversify its earnings base through active acquisitions albeit selectively. In addition, there is close to another c.S$300m in active asset redevelopment to drive upside to DPUs and NAVs over time in Singapore and Malaysia. To fund these initiatives, MLT will look to actively recycle capital through divestments of assets who have achieved close to their asset life cycle and targets close to S$200m – S$500m worth of assets to be divested in the coming FY25. We note that the REIT have achieved a divestment premium of c.12% historically and could look to achieve that opportunistically for future divestments. We maintain our estimates for FY25. 

Attractive value at below bok  , BUY, TP S$1.75

MLT share price has dipped by c.-21% since the start of 2024 on back of rising concerns in recent times on MLT’s China (c.20% of revenues) and Hong Kong (c.16% of revenues) given the more subdued operating environment. These concerns are not new but are unfounded.. That said, we believe that its diversified exposure where its developed markets exposures in SG, JP, AU and Asia Pacific (ex China) outlook remain robust with the logistics markets remaining in a landlord’s market. Overall, we remain attracted by its valuations, offering a FY25F yield of c.6.3%. In the event of a turn in interest rates, we expect allocations in the S-REITs to accelerate going forward and with increased positioning into sectors that can weather through economic downshifts.  On the back of this, we believe MLT remains well placed to deliver attractive total returns at current levels. 

Key items to watch

1.             Turnaround in its China operations, (ii) acquisitions, (iii) overall portfolio interest costs outlook.








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