Recent Action - Mapletree Logistics Trust

Taking advantage of the dip in price, I purchased 10,000 shares of Mapletree Logistics Trust (MLT) today as my maiden entry to the Mapletree family.

Has been eyeing several of the Mapletree counters in my watch list for some time and ironically my first choice in the Mapletree family is actually another trust : )

Anyway the reasons for purchase are summarised as follows.

The recent news concerning logistics players such as FLT and GLP signal a favourable outlook for this sector as a whole.

With a diversified portfolio in 8 countries, MLT presents a good choice with exposure to growth in the APAC region.

And add a well spread of tenants to the equation. I like the fact that the biggest sector of tenants accounts for just 24% of the revenue contribution. This is from the F&B sector by the way.

Exposure to the troubled oil & gas and marine sectors is also limited as they account for only 5%.

Customers-wise, none account for more than 5% of total gross revenue. I find this a good hedge against any major upheaval in specific industries.

Weighted lease term to expiry (WALE) of over 4 years. Although this is not too long in my opinion, I am not overly concern with this.

After all there is no one anchor tenant account that makes up a substantial portion of the revenue where it can skews the results upwards (or downwards!).

Furthermore a lower WALE might be advantageous to MLT since it has shown positive rental reversions in China, Vietnam, Japan and Hong Kong.

Portfolio occupancy remains high at 95.5% despite a slight decline from previous quarter. This can be be explained by the transitional downtime from a property in South Korea.

Importantly, occupancy rates from other countries actually improved from the last quarter.

93% of leases that expired in 1Q FY17/18 has been renewed or replaced.

Freehold and long leasehold properties. About 30% of MLT's portfolio is freehold and average expiry to their leasehold land is 47 years. Pretty long if you ask me.

Talking about portfolio, I also like the current and future yield-accretive acquisitions and AEIs by MLT.

Even with lower contributions from the South Korean property and absence of contribution from one block of Ouluo Logistics Centre, MLT's gross revenue actually grew by 7% year on year and NPI grew by 7.5%.

Nice!

Of course DPU increased of 2% year on year and 1.5% quarter on quarter doesn't hurt ; )

Risks

Total outstanding debt increased by S$18 million. However approximately 79% of total debt has been hedged into fixed rates.

Continued pressure over the increased in supply of warehouse space locally. However this is mitigated by the renewal and replacement of expiring leases as well as positive rental reversions in other markets.

Lastly, I'm paying a slight premium to the NAV. Not my usual style. But I feel the upsides outweigh this hence this purchase.

Note: Figures obtained from 1Q FY17/18 financial results.

Why I Feel M1 is a Potential Winner

With the release of the results yesterday, the selldown in M1 is expected today.

The magnitude of drop also doesn't surprised me. Afterall it has happened not too long ago during the announcement of the 4th entrant.

This is a classic example of market (people) sentiment.

People seldom look beyond the surface. Yes M1's earnings dropped. But they are still profitable. It is a company still making money and churning out decent dividends.

Furthermore as announced in their AGM, they are branching out into other stuffs apart from their traditional income. Stuffs such as smart metering and IoT. It takes time to realise the fruits from these plantings.

But the most important thing is this:

M1 is a prime candidate for M&A.

Considering the high barrier of entry into the telco sector, if I were a conglomerate looking to enter, I would seriously consider buying over the current players with existing infrastructure and customer base instead of starting from the ground.

Among the 3 incumbents, M1 looks attractive.

And we already have a hint to that happening recently. The interest is there. Buyers are willing to buy just that the seller is not willing. For now.

However I believe this is not the end of story. On the contrary this is just the beginning.

We will soon see more news on the takeover of M1 from this point onwards.

Usually deals like this takes a long time before coming to fruition. Just look at GLP.

* Extremely bias view with vested interest.