• Sale of three properties in Malaysia at a +12% premium above book or more than 2X of purchase price
• Divestment gains could boost DPU trend, giving a near term distribution boost.
• At an implied WACC of c.5.0%, stock is entering a virtuous cycle of growth  with accretive acquisitions possible as the REIT pursue a China + 1 strategy 
• Reiterate BUY, TP SGD 1.75 maintained

What’s new?

Divestment of three properties in Malaysia. Mapletree Logistics Trust (“MLT”) announced the divestment of three properties in Malaysia for a total consideration of RM 157.5mn +12% premium above the latest book value or more than 2X of its original purchase price. The sale is part of the manager’s ongoing asset recycling strategy to streamline its portfolio with an aim to reallocate capital back towards other higher yield properties or asset enhancement or development properties that the manager could be considering. Based on the sale consideration, the manager will reap gains of close to c.RM18mn (or c.SGD 5.5mn). After accounting for taxes, as per policy, we believe that the managers will be sharing with unitholders, providing a well needed boost to DPUs in the interim. 

Our view

Reinforces total return strategy. We continue to like MLT for its total return strategy (yield + growth in DPU + gains) that enable unitholders to participate in the value accretive strategies undertaken by the manager. A common concern in recent times is the drop of in potential fair value gains that could be shared have dropped due to slower divestment strategies in 1H24. This sale will provide a near term boost to DPUs. That said, our preference is for the manager to pursue growth as interest rates environment turn more conducive for acquisition activities to happen. With an implied WACC of 5.0% compared to acquisition yields ranging 4.5%-7.0%, especially in Asia Pacific region, we believe that MLT is entering a virtuous growth phase. Stock is trading close to 1.0x P/B and a forward yield of 5.8%. BUY , TP SGD 1.75.