Mapletree Logistics Trust’s management says it's looking out for weakness in demand for its properties, in the face of global economic weakness.
It reported an increase of 23.7% YoY in Q3 FY11 Net Property Income to S$ 58.9 mln and the Distribution per Unit increased by 10% YoY to 1.69 cents.
The Trust registered organic growth of 6% YoY backed by higher rentals and occupancy.
Year to date, the Trust has sealed 88% of lease agreements expiring in 2011.
The lease agreements revised during Q3 were done at 22% higher rentals.
Occupancy at various investment properties of the Trust continues to remain at 99%, compared to 98% in Q3 FY10.
The weighted average lease term to expiry of the underlying land of the properties is 46 years and the average term to expiry of lease agreements is 6 years.
The debt to total assets ratio at Mapletree Logistics Trust stood at 41% at the end of Q3 FY11 and it continues to enjoy Baa1 rating with a stable outlook from Moody’s.
Management says it's happy with the prevailing debt gearing at 41% of total assets, as it lies within their medium term target range of 40%-50%.
But earlier this year, management announced its ambition to bring down debt gearing to 25% over medium to long term which would also qualify for rating upgrade by Moody’s.
The Trust has reduced the total debt maturing in 2012 to 14% from 31% earlier by arranging re-finance for its JPY 17.3 bln loan.
Hence, the average debt duration has significantly improved to 3.7 years from 2.7 earlier.
The Trust, which is 40.8% owned by Temasek Holdings, has identified 21/23 Benoi Sector in Singapore for re-development, which would add 70,000 sqm to its Singapore portfolio.
Few further details of this development were provided.
Analyst Kevin Tan at OCBC is positive on this development as it reflects Mapletree Logistics Trust’s proactive approach to enhance value.
OCBC maintains its BUY rating on the stock with a slightly increased target price of S$ 1.07 (from S$ 1.06 earlier).
The questions that need to be asked about this story:
1. Management wants to bring debt down to 25% in the medium to long term, but says it's happy with 41% at the moment. What is the time frame for this?
2. How happy are tenants to pay 22% higher rents at a time that the global economy is weakening?
3. What are further details on the redevelopment of the Benoi Sector property?
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