"Capital recycling remains a key strategic focus for MLT, as management seeks to balance acquisition opportunities with divestments at a time when its aggregate leverage ratio is slightly above 40%," he adds.
In its most recent 4QFY2026 ended March, MLT reported in line results with DPU down 7% y-o-y to 1.819 cents, in the absence of divestment gains distribution.
Excluding this, DPU from operations was up 0.9% y-o-y, bringing full year payout to 7.262 cents, down 9.8% y-o-y, or down -3.4% excluding divestment gains.
MLT's portfolio occupancy rose 0.5ppt q-o-q to 96.9%; while rental reversions improved sequentially to 3.3% in 4QFY2026.
While China has shown signs of stabilising and bottoming out, it could still take possibly another three to four quarters for negative rental reversions to level off, says Wong.
Meanwhile, rental outlook in Hong Kong remains sluggish, but brighter prospects are expected in Singapore, Japan and South Korea.
Thus far, MLT has not seen significant impact from the Middle East conflict, with leasing demand remaining stable. Net electricity costs are manageable, forming less than 2% of property expenses.
See also: DBS upgrades SIA Engineering Co to ‘buy’ on improved risk-reward; lowers target price
"However, a prolonged conflict could exert cost pressures on tenants and weigh on overall leasing sentiment," warns Wong.
Upon taking into account recent acquisitions etc, Wong has trimmed his FY2027 DPU forecast by 4.5%, partly due to updated forex assumptions.
After rolling forward his valuations. Wong's fair value estimate is lowered from $1.40 to $1.36.
Yet, with MLT trading at FY2027 distribution yield of 5.9%, which is 0.3 sd above its ten-year average of 5.7%, Wong perceives that "value" has re-emerged and thus the upgraded call.
Lock Mun Yee of CGS International has similarly lowered her target price for MLT from $1.68 to $1.48.
For the current FY2027 and FY2028, Lock has lowered her DPU estimates by 1.79-2.13% on slower rental growth assumptions.
She is keeping her "add" call as she believes that MLT’s China logistics warehouse portfolio could be stabilising as deterioration in rental reversion is slowing.
For more stories about where money flows, click here for Capital Section
For Lock, potential re-rating catalysts include sustained leasing momentum amid positive rental renewals and accelerated asset recycling activities.
On the other hand, downside risks include softer macroeconomic outlook that could dampen its rental growth outlook.
Mapletree Logistic Trust units, as at 10.56 am is down 0.81% to trade at $1.22.
