Mapletree Logistics Trust Earnings: Currency Headwinds and Weakness in China Continue to Drag

Mapletree Logistics Trust’s M44U first-half fiscal 2024 (ending March) revenue fell 0.7% year over year to SGD 369 million, and net property income fell 1.0% to SGD 320 million. These figures both made up about 48% of our full-year estimates, slightly below our expectations due to persistent currency headwinds and weaker performance from the China portfolio. We lowered our fair value estimate to SGD 1.60 per unit from SGD 1.66 after reducing our rental growth assumption for the China portfolio and updating our foreign-exchange assumptions. However, we increased our distribution per unit forecast for fiscal 2024, 2025, and 2026 by 2%, 4%, and 3%, respectively, after factoring in the distribution of divestment gains. Based on the trust’s last closing price of SGD 1.47, we think the units are slightly undervalued. They trade at a fiscal 2024 dividend yield of 6.1%.

The no-moat trust’s overall operating performance outside China remains robust, with an occupancy rate near 100% on the back of a positive 9.1% rental reversion for the quarter ended September. Notably, the trust registered a strong positive 16.5% rental reversion in Hong Kong after renewing a lease with one of its top 10 tenants, Equinix. However, the strong performance was largely offset by the China portfolio, which registered a negative 8.6% rental reversion and a 4-percentage-point quarter-on-quarter decline in the occupancy rate to 93% as at the end of September. Management does not expect a quick recovery in the China logistics market, given the uncertain economic outlook weighing on overall demand. However, it expects the rest of the portfolio, which makes up 80% of revenue, to remain resilient and underpin income stability.