OCBC Investment Research
24 July 2025

Mapletree Logistics Trust Faces Headwinds but Remains a Resilient Bet: Comprehensive 2025-2026 Analysis

Executive Summary: A Mixed Start to FY26 for Mapletree Logistics Trust (MLT)

Mapletree Logistics Trust (MLT), one of Asia’s leading logistics real estate investment trusts, has started its financial year 2026 on a softer note. The trust saw a significant dip in its distribution per unit (DPU), a marginal decline in occupancy rates, and ongoing operational challenges, particularly in China. Despite these headwinds, MLT’s diversified portfolio, disciplined management, and ongoing capital recycling strategy continue to provide a foundation for long-term stability and growth. This detailed analysis covers MLT’s financial performance, operational challenges, ESG initiatives, comparative valuation, and outlook for investors.

MLT’s Investment Thesis: Strengths and Near-Term Challenges

MLT boasts a diversified logistics portfolio across Asia’s key markets, including Singapore, Hong Kong, Japan, Australia, Vietnam, China, and India. The REIT’s management has demonstrated strong execution capabilities and an effective capital recycling strategy, distributing net divestment gains to unitholders. The trust has historically benefited from the structural growth of e-commerce, but faces near-term pressures from rising borrowing costs, foreign exchange fluctuations, and persistent challenges in China’s operating environment.

Key Financial Highlights and Performance Metrics

• 1QFY26 DPU Decline: DPU fell 12.4% year-on-year to 1.812 Singapore cents, underperforming expectations as gross revenue and net property income (NPI) declined by 2.4% and 2.1% YoY, respectively. The drop was attributed to weaker contributions from China, adverse currency movements, and the absence of income from divested assets.
• Borrowing Costs: Total borrowing costs rose 2.3% YoY to SGD 39.4 million, pushing DPU lower for the fourth consecutive quarter. Without divestment gains, the adjusted DPU would have reflected a smaller 7.3% YoY decline.
• Portfolio Occupancy: Portfolio-wide occupancy slipped 0.5 percentage points quarter-on-quarter to 95.7%. Singapore and South Korea drove most of the decline, while Hong Kong and Malaysia showed improvement. India and Australia maintained full occupancy.
• Rental Reversions: Overall rental reversions moderated to +2.1% (from +5.1% in the previous quarter), or +2.8% excluding China. China’s negative rental reversions improved from -9.4% to -7.5%, with management targeting flat reversions by year-end.
• Leverage and Debt Hedging: Aggregate leverage increased to 41.2% (from 40.7%), mainly due to FX impacts. Notably, 84% of total debt is hedged. The cost of borrowing remained flat at 2.7% for the sixth straight quarter, with full-year guidance now at 2.7–2.8%, below previous expectations.

Financial Summary Table

Operational Performance: Portfolio Dynamics and Leasing Trends

• Singapore: Increased vacancy due to the completion of Mapletree Joo Koon Logistics Hub (occupancy at just 42.4%). Management aims to ramp this up to around 80% by year-end.
• China: Leasing market remains weak, but negative reversions are narrowing. Management expects stabilization barring further economic or trade disruptions.
• Japan and South Korea: Rental reversions moderated but remained positive (Japan: 7.2% vs. 15.7% prior; South Korea: 1.1% vs. 4.7%).
• Hong Kong and Malaysia: Occupancy improved, contributing positively to the portfolio.
• Australia and India: Maintained full occupancy, reflecting stable demand.

MLT’s overall rental reversions stood at +2.1% for 1QFY26, or +2.8% when excluding China. Management’s focus for the remainder of the year includes filling up vacant space in Singapore, continuing asset enhancement initiatives, and pursuing further divestments (targeting SGD 150 million for the rest of FY26).

ESG and Sustainability Leadership

• ESG Rating Upgrade: MLT improved its ESG standing, particularly in talent management and green building practices.
• Carbon Neutrality Targets: Committed to carbon neutrality for Scope 1 and 2 emissions by 2030, in alignment with Mapletree Group’s ambition for net zero by 2050.
• Solar Energy & Green Certification: Aims to expand solar capacity to 100 MWp and achieve green certification for over 80% of its portfolio by 2030 (current: 45%).

Valuation and Comparative Analysis

Risks and Potential Catalysts

• Key Risks: Rental defaults by major tenants, interest rate spikes raising borrowing costs, and foreign exchange volatility across its diversified geography.
• Potential Catalysts: Stronger-than-expected logistics rent increases, DPU-accretive acquisitions, and further distribution of divestment gains from capital recycling initiatives.

Company Overview and Portfolio Breakdown

MLT, listed on the SGX-ST main board since July 2005, is Singapore’s first Asia-focused logistics REIT. As of 31 March 2025, MLT manages 180 properties across Singapore, Australia, China, Hong Kong SAR, India, Japan, Malaysia, South Korea, and Vietnam, with assets under management totaling SGD 13.3 billion. The portfolio’s gross revenue and NPI breakdown for FY25 is geographically diversified, with Singapore, China, and Hong Kong each contributing over 15%.

FY25 Gross Revenue Breakdown by Geography

• Singapore: 27.7%
• Japan: 11.3%
• Hong Kong: 17.0%
• South Korea: 7.9%
• China: 17.0%
• Malaysia: 6.2%
• Australia: 7.3%
• Vietnam: 4.5%
• India: 1.1%

FY25 Net Property Income Breakdown by Geography

• Singapore: 27.5%
• Japan: 11.0%
• Hong Kong: 18.6%
• South Korea: 7.6%
• China: 14.9%
• Malaysia: 6.3%
• Australia: 8.0%
• Vietnam: 4.8%
• India: 1.2%

Financial Performance and Ratios

Income Statement Highlights (SGD millions)

Profitability and Credit Ratios

• Return on Equity (FY2025): 2.50%
• Return on Assets (FY2025): 1.51%
• Operating Margin (FY2025): 68.53%
• Payout Ratio (FY2025): 210.72%
• Total Debt/EBIT (FY2025): 10.86
• Net Debt/Equity (FY2025): 0.75

Conclusion: Outlook for Investors

While Mapletree Logistics Trust faces near-term earnings pressure from higher borrowing costs, currency headwinds, and a challenging China market, it remains well-positioned for long-term growth due to its diversified portfolio, proactive asset management, and a solid record of capital recycling. The trust’s ESG leadership and resilience during market cycles add to its investment appeal. Investors should monitor occupancy ramp-ups, further divestments, and stabilization in China as key drivers for future performance.

For those seeking exposure to Asia’s logistics sector with a long-term horizon, MLT continues to offer an attractive balance of yield, growth, and sustainability.