MLT 4QFY25 Results: Trade War Risk & China Weakness Prompt HOLD Rating (Target S$1.31)

UOB Kay Hian Private Limited Friday, 25 April 2025
Mapletree Logistics Trust (MLT SP) Faces Headwinds: 4QFY25 Results Analysis and Trade War Risks
Mapletree Logistics Trust (MLT), a prominent Asia-focused logistics REIT, recently reported its financial results for the fourth quarter of the fiscal year 2025 (4QFY25). While the trust boasts a substantial portfolio of 180 logistics properties valued at S$13.3 billion across nine Asian markets, recent performance reflects growing challenges, particularly stemming from its China operations and broader macroeconomic concerns like potential trade wars and currency fluctuations.
The report maintains a HOLD rating on MLT, adjusting the target price slightly downwards from S$1.35 to S$1.31, suggesting a potential upside of 12.9% from the current share price of S$1.16.
4QFY25 Financial Performance Highlights
MLT’s 4QFY25 results fell short of expectations, primarily impacted by headwinds from China and the strength of the Singapore dollar against regional currencies.
Distribution Per Unit (DPU): DPU for the quarter was 1.955 Singapore cents, marking an 11.6% decline year-on-year (yoy). This was partly due to a 1.5% increase in the number of units issued. 1
Gross Revenue: Declined by 0.8% yoy to S$179.6 million. 1
Net Property Income (NPI): Decreased by 1.6% yoy to S$152.8 million. 1
Distributable Income: Fell by 10.3% yoy to S$99.1 million. This figure included S$7.7 million distributed from divestment gains, compared to S$12.0 million in the same period last year. 1
The weaker revenue and NPI were attributed to lower contributions from properties in China, the absence of income from divested assets, and adverse currency movements, specifically the Australian dollar (-4.6% yoy) and Korean won (-9.1% yoy) depreciating against the Singapore dollar. Furthermore, borrowing costs saw a 4.0% increase yoy, adding pressure to the bottom line. 1

4QFY25 RESULTS SUMMARY

Operational Performance: Occupancy and Rental Reversions
Despite financial pressures, MLT maintained overall portfolio stability in terms of occupancy.
Overall Occupancy: Remained stable at 96.2% as of March 2025, slightly down from 96.3% in the previous quarter but up from 96.0% a year ago. 1, 2
Country-Specific Occupancy:
Improvements were seen in Japan (up 0.9ppt qoq to 99.7%) and China (up 0.5ppt qoq to 94.0%). 1
Dips occurred in Singapore (down 0.4ppt qoq to 95.9%), Malaysia (down 0.4ppt qoq to 97.1%), and Vietnam (down 2.2ppt qoq to 97.8%). These are considered transitional vacancies expected to be filled by domestic demand. 1
Australia and India maintained full occupancy (100.0%). 1
Rental Reversions: The portfolio achieved a positive rental reversion of 5.1% in 4QFY25, an improvement from 3.4% in the previous quarter and 2.9% a year ago. 1, 2
Strong performance was noted in Singapore (+7.0%), Japan (+15.7%), and South Korea (+4.7%). 1
China, however, experienced a significant negative rental reversion of -9.4%, dragged down primarily by Tier 2 cities (-10.8%) while Tier 1 cities saw a slight positive reversion (+0.3%). This marks the seventh consecutive quarter of negative reversions in China. 1
Excluding the China portfolio, the overall positive rental reversion was stronger at 6.9%. 1
Revenue Impact: Revenue from China contracted by 15.7% yoy in 4QFY25 due to the persistent negative rental reversions. Revenue from South Korea also declined by 11.7% yoy, largely due to the weaker Korean won. 1
Trade War Jitters: Management Cautions on Future Demand
MLT’s management expressed caution regarding the evolving trade policy landscape. A protracted trade war poses a significant risk, potentially dampening demand for warehouse space, which could lead to reduced occupancy and lower rental rates. 1, 2
Currently, tenants serving domestic consumption constitute 85% of MLT’s revenue base, providing some resilience. Export-oriented businesses account for the remaining 15%. The exposure varies by market: 2
Australia, Japan, and South Korea: Primarily cater to domestic demand. 2
Malaysia: 10% of tenants in the export sector. 2
China: 15% of tenants in the export sector. 2
Hong Kong: 20% of tenants in the export sector. 2
Singapore: 25% of tenants in the export sector. 2
Vietnam: 30% of tenants in the export sector. 2
Early signs of negative impacts from reciprocal tariffs have been observed: 2
In Singapore, some shipping, freight, and semiconductor firms faced order suspensions, leading to a temporary spike in demand for warehouse space. 2
In Vietnam, order cancellations for footwear, apparel, and solar panel companies resulted in stranded shipping containers piling up at ports. 2
China Market Challenges Persist
China remains a key area of concern. Management anticipates the negative rental reversion trend to continue, potentially remaining in the high-single-digits for the next four quarters (FY26). 1, 2 Despite this, occupancy might hold firm due to an aggressive strategy involving attractive tenant incentives to retain occupants. Leases in China have a relatively short weighted average lease expiry (WALE) of 1.4 years. Significant uncertainty looms over whether potential US tariffs of 145% on Chinese imports will be fully implemented. 2
Portfolio Management: Divestments and Redevelopment
MLT actively managed its portfolio in FY25 through divestments and redevelopment initiatives.
Divestments: 14 properties with older specifications and limited redevelopment potential were announced or completed, totalling S$209 million. These sales occurred at an average premium of 17% to their valuation. However, the pace of divestment is expected to decelerate as potential buyers become more cautious. 2
Distribution Policy Change: Management has adopted a conservative stance and will retain divestment gains going forward, rather than distributing them. This decision is expected to dampen future DPU. 2
Redevelopment: The redevelopment of 5A Joo Koon Circle in Singapore (formerly 51 Benoi Road) is progressing well. This six-storey Grade A ramp-up facility achieved a 2.3x uplift in Gross Floor Area (GFA). Ahead of its Temporary Occupation Permit expected in May 2025, approximately 46% of the total Net Lettable Area (NLA) of 848,000 sq ft was pre-committed, with another 30% under active negotiation. Interest has been healthy from tenants in third-party logistics (3PL), fast-moving consumer goods (FMCG), e-commerce, and supermarket sectors. 2
Financial Health: Leverage, Debt, and Valuation
MLT’s financial position shows stability in leverage but anticipates rising debt costs.
Leverage: Aggregate leverage was stable qoq at 40.7% as of March 2025, up from 38.9% a year prior. 1, 2
Cost of Debt: The average cost of debt remained stable at 2.7% in 4QFY25. However, MLT has guided for this to increase to 3.0% by the end of FY26 due to loan refinancing and hedge replacements at higher prevailing interest rates. These higher borrowing costs could exert downward pressure on future distributions. 1
Hedging: The proportion of borrowings on fixed rates decreased slightly to 81% as of Mar 25, down from 82% in Dec 24 and 84% in Mar 24. 2
Debt Maturity: Weighted average debt maturity stood at 3.8 years. 2
Net Asset Value (NAV): NAV per unit declined by 2.2% qoq to S$1.31. This was primarily due to a S$116 million currency translation loss and a S$62 million fair value loss on investment properties, mainly in China, South Korea, and Singapore. Lower valuations in China stemmed from reduced rents and occupancies, while Northern China properties also saw cap rate expansion of about 25 basis points. 2

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Analyst Outlook: Earnings Revision and Valuation
Reflecting the persistent challenges, DPU forecasts for FY26 and FY27 have been cut by 4%. This revision accounts for the continued negative rental reversions anticipated in China and the recent weakness of key regional currencies (Japanese yen, Korean won, Malaysian ringgit, Vietnam dong) against the Singapore dollar. 2
Despite these headwinds, the HOLD rating is maintained. The target price is revised to S$1.31, derived from a Dividend Discount Model (DDM) using a cost of equity assumption of 7.25% and a terminal growth rate of 1.5%. The current share price offers an FY26 distribution yield of 6.8%. 1, 2
Potential Share Price Catalysts
Potential positive drivers for MLT’s share price include: 2
Successful rejuvenation and repositioning of the portfolio towards modern specification logistics facilities, with a focus on domestic consumption and e-commerce sectors. 2
Positive financial contributions from ongoing redevelopment projects in Singapore and Malaysia. 2
Portfolio Overview (as of Mar 25)
Valuation by Country: Hong Kong (23.3%), Singapore (20.1%), China (18.1%), Japan (14.4%), South Korea (7.9%), Australia (7.2%), Malaysia (5.3%), Vietnam (3.0%), India (0.7%). 2
Occupancy by Country: Australia (100.0%), India (100.0%), Japan (99.7%), Vietnam (97.8%), Hong Kong (97.7%), Malaysia (97.1%), South Korea (96.6%), Singapore (95.9%), China (94.0%). 2
Top 10 Tenants (% of Gross Revenue): Equinix (3.7%), CWT (3.4%), Coles Group (3.1%), SF Express (2.0%), HKTV (1.8%), YCH (1.6%), Coupang (1.6%), Woolworths (1.5%), Cainiao (1.5%), Bidvest (1.5%). 2

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