Brokers' take

Mapletree Logistics Trust | Hold

May 26 close: S$1.195

Target price: S$1.29

DBS Group Research, May 26

MAPLETREE Logistics Trust (MLT) announced the proposed acquisition of two warehouses, Mapletree Logistics Bac Ninh Phase 1 in Vietnam from its sponsor, and Dakonet Logistics Center in South Korea from a third party vendor.

At an estimated net property income yield of 10 per cent and 8 per cent for the Vietnam and Korean properties respectively, these acquisitions will somewhat compensate for the dip in earnings from Singapore over FY16-17 forecast (where expected property conversions from single-user to multi-tenanted properties are ongoing). While high yields are reflective of the high risk-premium associated with the overseas exposure, we are comfortable given the sponsor's enlarged presence in Vietnam and MLT's previous positive experiences from its previous deals in South Korea. Moreover, we see good income and credit visibility as the properties are leased to international third party logistics players and are supported by a long lease expiry profile of 2.1 years and 4.2 years respectively.

Sabana Shari'ah Compliant Reit | Buy

May 26 close: S$0.86

Target price: S$0.95

UOB Kay Hian, May 26

WE recently visited the company post its quarterly results release. Investors are likely weary of the company's efforts in the renewal of its expiring 11 master leases, resulting in a nearly 20 per cent drop in share price over the past year. In addition, the suggested conversion of four of these leases exposes the company to potential leasing risk owing to conversion downtime. We believe the market overreaction presents opportunity as negatives are factored in.

The company is looking to convert four of the 11 properties into multi-tenanted buildings with underlying occupancies of 61-89 per cent. 23 Serangoon North Ave, 18 Gul Drive, 34 Penjuru Lane and 15 Jalan Kilang Barat with master leases expiring this November, are slated for multi-tenanted conversion. This would expose them to leasing risk attributable to downtime post conversion. Our worst scenario of occupancy for the expiring master leases dropping to 50 per cent still implies a healthy 7 per cent yield.

Compiled by Chan Yi Wen

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