On 29 May 2020, Mapletree Logistics Trust shares were trading at a record high of $2.05. The bullish form of MLT share price is certainly impressive given the unprecedented challenges faced by the S-REIT sector. Then again, the surge of MLT share price has not been linear nor exponential. At the peak of the COVID-19 pandemic in March 2020, MLT share price was mercilessly sold down, causing it nose-dived from $2.00 on 5 March 2020 to $1.20 on 23 March 2020.
Investors who kept faith with this counter must be smiling to themselves now as MLT share price subsequently regained form after the release of the full-year financial report for FY2019/20. It was revealed that revenue increased 8% year-on-year to reach $490 million while net property income increased 12.6% to $438.5 million.
The positive result gave MLT share price the legitimate reason to continue flying amid the COVID-19 outbreak. Indeed, MLT share price is one of the few exceptions to buck the trend of most S-REITs, which are mostly reeling from the devastating effects of COVID-19 pandemic.
Make no mistake, S-REIT is a sector that is previously known to be defensive among investors. But the case of Eagle Hospitality Trust serves as a lesson that even S-REIT is not immune from crisis. S-REITs which specialize in hospitality and shopping malls suffer maximum damage due to lockdowns in many countries. Against this backdrop, what is the outlook for MLT share price?
Admittedly, I was very tempted when MLT share price was trading at $1.30 back in 2019. However, after reviewing the cash flow statement, I decided to give it a miss. In this article, I will provide the reason why I think the growth expansion of MLT may not be sustainable in the long run despite the recent bullish MLT share price.
Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. Furthermore, I am not vested and have never invested in MLT before. Whether MLT share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.
MLT share price riding the storm
To help S-REITs overcome the COVID-19 storm, MAS and IRAS had extended the timeline for S-REITs to distribute at least 90% of their income from 3 months to 12 months to qualify for tax transparency. The aim is to provide S-REITs greater flexibility to manage their cash flows. However, MLT announced that it would pay a distribution of 2.048 cents per unit on 12 June 2020 for the period from 1 January 2020 to 31 March 2020. The recent revival of MLT share price must be attributed to this.
Apart from the DPU, the management also provided the timely assurance that “overall, tenants from the retail, hospitality and travel industries, which account for about 10% of MLT’s revenue, are the hardest hit by COVID-19”. In addition to this, MLT’s tenant in the Japan and Hong Kong remain fully operational while 5% of the tenant base in Singapore is impacted. On the basis of these factors, MLT share had recovered in double quick time.
Interestingly, despite the ravages caused by the Hong Kong civil protests in 2019 and the ongoing COVID-19 pandemic, there was [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
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