Company Review - Mapletree Logistics Trust

Mapletree Logistics Trust (MLT, SGX:M44U) is Singapore's first Asia Pacific-focused Logistics REIT. While focused on logistics assets, MLT is quite diversified in terms of geographical regions, boasting assets from 9 different countries/regions. This post will be broken down into the following segments:

1. Portfolio Overview

2. Key Financial Metrics/Trend

3. Occupancy and Leases

4. Recent Moves/Pipeline

5. Outlook

6. Thoughts

1. Portfolio Overview

As at 31st March, MLT has asset presence in 9 regions, with the top 3 (Singapore, Hong Kong, China) accounting for 65.2% of the portfolio in terms of AUM. Below shows a table of number of properties, split by countries.

2. Key Financial Metrics/Trend

Both Gross Revenue and Net Property Income (NPI) grew at a steady rate, maintaining a relatively constant margin. It is worth noting that MLT's managed to keep growing in most metrics even through the pandemic, partially due to new acquisitions, but also because logistics are relatively defensive in view of a pandemic. 

At a unit level, unitholders enjoyed consistent growth in both DPU and NAV. Even though NPI increased year-on-year, DPU and NAV could have decreased if too many new units were issued. MLT's manager ensured that acquisitions would benefit unitholders and keep things accretive. 

Debt-wise, leverage held steady at 38.4%, in line with past years, and leaving ~12% headroom for further acquisitions, with the new gearing limit of 50% set by MAS. Both Interest Coverage (5.1x) and Cost of Debt (2.2%) stayed within recent years' range.

3. Occupancy and Leases

WALE stood at 3.6 years as at 31st Mar 2021, with 26.4% expiring in FY21/22.

Overall occupancy rate improved q-o-q from 97.1% to 97.5%, due to improvements in Hong Kong, South Korea and China. China and Japan have the lowest occupancy rates at 95.3% and 95.9% respectively.

Of the customers that the properties are leased to, the top 10 customers account for ~25.7% of total gross revenue, with CWT being the top by far, at 7.2%. The above graph also shows that all regions (except newly acquired India) are represented in the top 10 tenants, which shows a reduced concentration risk geographically as well.

Looking at the underlying land lease, the weighted average (excluding freehold) is 44.4 years. 20.9% of the portfolio is on freehold land, while 14.4% have land leases at or below 30 years

Of the land leases that are under 5 years, most of them come with an option to extend (eg. 30+30), with the exception being 37 Penjuru Lane with a 30 year lease expiring in 2026. The property has a NLA of 11,150 sqm, which is 0.17% of the total portfolio NLA.

4. Recent Moves & Pipeline

In 2H CY 2020, MLT announced the acquisition of properties in most regions in it's portfolio (Australia, China, Malaysia, Vietnam, Japan).

In 1H CY 2021, MLT announced a deepened foothold in South Korea, with the acquisitions of five modern logistics facilities. MLT also marked it's first foray into India during this period, with a March announcement to acquire 2 Indian properties.

In terms of acquisition pipeline, MLT's sponsor MIPL has 15 projects completed in China and Vietnam, coming up to 2,383,148 sqm in GFA. 

MIPL also has 13 projects underway in China, Malaysia, Vietnam and Australia, coming up to 2,184,182 sqm in GFA.

For some context on what that is relative to MLT's portfolio, MLT had 5,049,412 sqm in GFA in March last year.

5. Outlook

Here, we look at the future prospects of the logistics industry, with a focus on Asia Pacific for MLT relevance.

GSCi, IHS Markit, McKinsey

APAC is projected to benefit the most from E-commerce related logistics growth in the next 5 years. As MLT's focus is already on the APAC region, it stands to benefit directly, without the need for a pivoting in focus/mandate.

CBRE Research, Jan 2021

For short-term development, Seoul and Tokyo will receive the bulk of the supply in APAC. According to CBRE Research, Tier 1 cities in Mainland China still suffers from a lack of supply. This prompted some occupiers to turn to nearby tier 2 cities in coastal areas instead.

This could bode well for MLT, as the acquisition pipeline from the sponsor includes a lot of properties in China (not limited to tier 1 cities).

6. Thoughts

As other developers continue to develop new properties to meet the supply, MLT would need to rejuvenate assets to make them "future ready". This can be in terms of things like cold storage facilities, server/connectivity facilities and support for automation technologies. Looking through the reports, it seems that that has been MLT's focus, but it's hard to tell what the "modern logistics" term that MLT always mention mean.

The logistics outlook seems stable to me. Although there are some disruptions/areas to keep up to (in terms of automation etc), these risks are not as high as technology or data centre related businesses, at least in my opinion.

On the management side, unitholders seem to have benefited from the manager's decisions thus far, with stable or improving metrics (at least for those that we looked at).

Hope you found this review informative! Again, subscribe with your email through the sidebar if you would like to get notifications on new posts :D



Author's note:

At the point of writing, I am not a shareholder of Mapletree Logistics Trust. I have put in my best effort to ensure that the facts are accurate, but I do not guarantee it. Opinions are my own and do not constitute any recommendations.
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