Mapletree Logistics Trust Actively Managing Its Portfolio To Drive Growth

No-moat Mapletree Logistics Trust M44U, or MLT, is acquiring a portfolio of logistics assets for a total acquisition cost of SGD 947 million. The portfolio comprises six properties in Japan and one property each in Australia and South Korea. We are largely positive on this transaction, given that the assets are located in attractive logistics markets with favorable market demand and supply dynamics. We also like that the Australian and South Korean assets have in-built annual rental escalation of 3% and 1.5%, respectively, while the existing leases in Japan and Australia are below current market rents by 3% to 10%, based on the company’s guidance. We think that this will support long-term organic rental growth for the trust.

On the pricing front, we note that the entry yield of its Japan assets of 3.5% is 35 basis points lower (more expensive) than the industrial prime yield in Tokyo (according to CBRE). That said, we think that the steeper price is offset by the strong rental reversionary potential of the Japanese assets and undemanding entry yields of its Australian and South Korean properties of 4.7% and 4.6%, respectively. The trust is raising SGD 200 million of equity and drawing down Japanese yen and offshore Chinese yuan debt to fund the acquisition. As the acquisition is largely in line with our acquisition growth assumption for MLT, we maintain our fair value estimate at SGD 1.66 per unit. We think the units are fairly valued at the current price and encourage investors to wait for a better entry point.