Mapletree Logistics Trust returns from coma
Lifetime Membership On 21 July 2022, Mapletree Logistics Trust (SGX: M44U) delivered its 1QFY2022/2023 result. In view of this, its time to take stock the performance of the S-REIT. Unit price had tumbled following the US Federal Reserve interest rate hikes in March and May. Subsequently, it seems that the counter had bottomed in late May as unit price began to start climbing. The tepid unit price performances were attributed to the lack of buying by institutional investors. For the past 7 months, Mapletree Logistics Trust did not feature in the SGX Top Ten Institutional Net Buy Stocks.
The million-dollar question confronting investors right now must be whether Mapletree Logistics Trust (M44U) will launch another mega equity financing to fund its overseas logistics asset acquisitions. The $700 million equity fundraising in November 2021 to purchase the China, Vietnam and Japan assets had knocked the wind out of the unit price, which never returned to the $2.00 mark prior to the equity fundraising.
For background, the principal activity of MLT is to invest in a diversified portfolio of logistics real estate in Asia Pacific with the aim of providing its unitholders with a stable distribution stream. As at 30 June 2022, the Group’s portfolio had grown to a portfolio of 185 properties in Singapore, Australia, China, Hong Kong SAR, India, Japan, Malaysia, South Korea and Vietnam. The total value of assets under management is $13.0 billion.
During the quarter, MLT completed the acquisitions of Mapletree (Yuyao) Logistics Park in China and Baeksa Logistics Centre in South Korea. The management has announced the redevelopment of 51 Benoi Road in Singapore, as well as the potential amalgamation of Subang 3 and 4 in Malaysia with the two land parcels acquired recently. The Benoi redevelopment project is estimated to cost approximately $197 million and is expected to be completed by first quarter of 2025. The Subang redevelopment cost is expected at around $173 million and project completion is targeted in 2027.
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Looking at the recent developments, my view is that an equity funding may take place near the end of the year to pay for the S-REIT’s DPU-accretive acquisitions.
The current MLT unit price is actually very attractive in terms of accumulation. Assuming forward full-year DPU is 9 cents and assuming that you had bought at the current $1.78, the annual DPU yield should be about 5.05%, which is much higher than bank saving rates or Singapore Saving Bonds. In this regard, the falling Mapletree Logistics Trust unit price (SGX: M44U) may provide investors good opportunities to buy the dip.
I had bought 16,000 shares when MLT share price was trading at $1.96. As I have bought the shares using my SRS account, I intend to hold the MLT shares for the long-term. This means that my intent of holding the shares is for dividend collection. Nonetheless, the sharp drop in MLT unit price means that I would need to collect at least 2 years of distributions to break-even my initial capital cost (assuming the annual DPU remains at 9.2 cents and that the unit price remains at current level).
Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. I am vested in this counter, so my views on Mapletree Logistics Trust (M44U) share price may be biased.
Mapletree Logistics Trust (SGX: M44U) takes on the Fed
In the latest financial result, Mapletree Logistics Trust (MLT) turned in a decent set of performance. Gross revenue increased 14.6% year-on-year to $187 million while net property income increased 13.2% to $163 million. Net profit climbed 21% to $100 million while DPU increased 5% year-on-year to 2.268 cents. The solid performance was driven largely by the acquisitions completed previously. Amid the interest rate hike environment, unitholders must be wondering if the S-REIT would take on more bank loans to fund asset acquisitions.
Total debt outstanding increased to $5.03 billion as at 30 June 2022. This was mainly due to additional loans drawn during the quarter to fund the two acquisitions in South Korea and China. Consequently, the leverage ratio increased slightly to 37.2% as at 30 June 2022. This is still within the regulatory limit of 50%. Whilst there is still headroom for Mapletree Logistics Trust to borrow, I think the maximum gearing ratio for MLT is 40% given the management’s prudent capital management.
The biggest headwind confronting MLT should be [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
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