Mapletree Logistics Trust’s Q1 Fiscal 2023 In Line; Strong SGD, Rising Interest Rates Weigh On FVE

Mapletree Logistics Trust, or MLT’s, first-quarter fiscal 2023 (ending March) operating performance was generally in line with our expectations. However, we are now seeing headwinds from U.S. federal-funds rate hikes and the strengthening Singapore dollar that would erode its distributions per unit, or DPU, in the near term. Hence, we have lowered our fair value estimate to SGD 1.66 from SGD 2.00 after: 1) factoring in the impact of a stronger Singapore dollar against foreign currencies; and 2) reversing our expectations of a 35-basis-point yield compression for its logistics assets that we previously baked in to reflect the tight acquisition yield environment. Our fiscal 2023 DPU estimate is lowered slightly to SGD 0.0908 from SGD 0.0910 and imputes a forward distribution yield of 5.5% based on our fair value estimate. We also expect minimal DPU growth of 0.5% for fiscal 2024 after its foreign currency hedges wear off over the next 12 months. While we continue to believe in the stewardship of MLT’s capable management team to steer the trust through the challenging macroeconomic conditions, we think the units are fairly valued at the current price and encourage investors to wait for a better entry point.