Mapletree Logistics Trust Earnings: In Line; Currency Headwinds Persist; Units Fairly Valued

Mapletree Logistics Trust M44U continues to face currency headwinds, with its fourth-quarter fiscal 2023 (ending March) revenue and net property income declining for the third consecutive quarter by 0.7% and 1.8% respectively, on a quarter-on-quarter basis. However, distribution per unit grew 1.8% quarter on quarter due to partial distribution of the gains from the divestment of 3 Changi South Lane. As the results were in line with our expectations, we retain our fair value estimate of SGD 1.66, after rolling forward our model and fine-tuning our assumptions. We expect fiscal 2024′s DPU to decline 3% year on year to SGD 0.0861 due to continued currency headwinds, higher cost of borrowing, and weaker leasing performance for its China portfolio. This implies a fiscal 2024 dividend yield of 4.9% based on its last closing price of SGD 1.75. In our view, the trust is fairly valued presently, and we encourage investors to wait for a better entry point.

Another area that was most negatively affected by currency headwinds was the trust’s portfolio valuation. The trust ended fiscal 2023 with a portfolio value of SGD 12.8 billion, after taking into account a net translation loss of SGD 758 million that was partly offset by a SGD 224-million revaluation gain. Narrowing in on the revaluation gain, the trust saw cap rate compression in Japan, Hong Kong and Vietnam, with Japan enjoying a robust 100-basis-point cap rate compression. On the other hand, the trust saw cap rate expansion in Singapore, South Korea and Australia, ranging between 10 basis points and 100 basis points. The cap rate movements were largely in line with our expectations, and we think opportunities will begin to emerge in the Singapore and Australia markets as yields continue to adjust upward to the higher cost of debt.