Broker's take: DBS upgrades MLT to 'buy', says it's 'safe harbour' amid virus outbreak

DBS Group Research has upgraded Mapletree Logistics Trust (MLT) to "buy" and adjusted its 12-month target price to S$1.85 from S$1.90, calling the real estate investment trust (Reit) a safe harbour amid the Covid-19 pandemic.

Units of MLT were down S$0.03 or 1.8 per cent to S$1.60 as at 11.52am on Wednesday.

DBS analyst Derek Tan on Wednesday said MLT's pure logistics exposure is least impacted by the coronavirus outbreak, and Singapore's tightening restrictions on workspaces imply the Reit's earnings will remain more stable than those of its peers.

"We see value emerging for MLT after its recent share price correction," he added.

Regarding the virus outbreak's impact on MLT's tenants in China, Singapore and Hong Kong, Mr Tan said DBS anticipates some rent relief for tenants but the gradual relaxation of restrictions in China implies the initial worries of a widespread rebate are unlikely to materialise.

The DBS research team expects acquisitions to be a key unit price driver for MLT.

It remains optimistic that the Reit can make acquisitions but only towards the end of the second half of its fiscal 2021 onwards. Opportunities will likely come from its sponsor as it has an extensive pipeline of properties, DBS added.

Citing the Reit's bigger balance sheet and financial capacity to take on more, DBS said it assumes MLT will make S$350 million in acquisitions by the end of FY2021.

The Reit's gearing remains stable at about 38 per cent, DBS noted.

UOB Kay Hian previously also upgraded MLT to "buy" and similarly noted it was less impacted by the Covid-19 pandemic.