Mapletree Logistics Trust haunted by acquisition woes

Singapore cap rates are too competitive.

According to OCBC, Mapletree Logistics Trust (MLT) reported NPI of S$67.5m and distributable amount of S$41.4m for 2QFY13, representing a YoY growth of 14.6% and 1.2% respectively.

Here's more from OCBC:

Contributions from its past acquisitions and improved operating metrics were the key drivers for the performance. DPU similarly grew 1.2% YoY to 1.71 S cents (3.0% growth after stripping off gains from divestment in 2QFY12).

This brings the 1HFY13 DPU to 3.41 S cents, forming 48.3%/48.7% of our/consensus full-year DPU projections.

Operationally, we note that MLT’s portfolio occupancy improved 0.2ppt QoQ to 99.2%, driven by stronger take-up rates in China, Hong Kong and Singapore. Leases renewed/replaced achieved positive rental reversions of 8% on average, lower than 10% seen in 1Q.

However, this was mainly dragged down by the restructuring of the hybrid lease at 60 Alps Avenue in Singapore to triple-net lease. Excluding that, 16% positive reversions would have been clocked. For the rest of FY13, we understand that only 4.2% of its leases by NLA are due for renewal. Hence, we believe its portfolio income will remain stable.

Looking ahead, management expects the overall acquisition activity to moderate. While MLT is actively looking at investments in Korea and China and new markets like Indonesia and Australia, the REIT shared that cap rates in Singapore have been very competitive and growth in Japan may be relatively muted.

Hence, it intends to turn more aggressive on capital recycling and asset enhancement (AEI)/ asset redevelopment. In fact, MLT is currently in advanced negotiations with a major third-party logistics service provider for a build-to-suit development at Iwatsuki Centre, Japan. If concluded, the yield is expected to be enhanced at this property.