MLT to log in superior returns: OCBC

SINGAPORE (Mar 7): OCBC Investment Research continues to rate Mapletree Logistics Trust (MLT) a “buy” with a fair value estimate of $1.50.

Among the Singapore REITs (S-REITs) sector, MLT is the third best performing counter. YTD, the trust has delivered total returns of 14.4%, higher compared to the FTSE ST REIT Index and STI that have generated 10.2% and 5.2% of total returns YTD, respectively.

In a Thursday report, analyst Andy Wong Teck Ching says, “We continue to like MLT for its resilient portfolio, strong management team and potential for further capital recycling activities to unlock value for unitholders.”

“We roll forward our valuations, and also ascribe a lower cost of equity assumption of 7.5% to take into account a more conducive interest rate environment, but partially offset this by incorporating a more conservative terminal growth rate assumption of 2%,” adds Ching.

In 2015, the trust first penetrated in the Australian logistics sector, and as at Dec 31, 2018, it has 8.3% of its property asset value contributed from there.

Despite concerns over headwinds surrounding economic growth Down Under, the analyst believes that the fundamentals of the logistics sector remains to be largely healthy.

Meanwhile, the CEO of Australia-listed Goodman Group has stressed that structural change in e-commerce globally will drive the logistics sector, and that industrials are under-represented in most institutional portfolios. He also expects to see more growth in the next three to five years.

Similarly, CBRE also opined that the e-commerce sector in Australia is set to inject about 350,000 sqm of additional new supply into industrial and logistics space market in Australia from 2019 to 2022. And as more firms aim for same-day delivery, there would be a surge in demand for logistics spaces in prime locations near consumers.

As at 4.20pm, units in MLT are trading at $1.42 or 18.2 times FY19 earnings with a DPU yield of 5.6%.