Mapletree Logistics Trust

[weijian]

Another acquisition
https://www.mapletreelogisticstrust.com/..._final.pdf

Spot the lemon in the package Demand is overwhelming I think due to good experience from REIT fund raising past 2 years.

After so many years, i finally spotted the lemon.
I guess when you add some structure in between, we have to be naturally skeptical about it.

Off my mind, Keppel DC Reit has done plenty of sales/leaseback via such intermediary structures.

[EnSabahNur]

What's the lemon?

[Shiyi]

Since this is a public forum, appreciate it if cryptic language can be substituted by plain English.

[specuvestor]

Wow it’s been almost 4 years and I’ve to reread the acquisition presentation 😅

I think I was looking mainly on 1) in a bag of oranges there’s bound to be lemons in the package. And in this case the Nantong Nanchang Jinan seems like lemons with 80% occupancy even after operating 3-4 years. If it’s a sale and leaseback structure (cause we are unsure of the original owner) the WALES is also too short for comfort

2) This was a Covid year and their discount to valuation was quite small which will be detrimental when interest rate normalises. Share price was about $2 when REITs was doing well and now it’s back to $1.25 similar to pre 2019

Agree there are much bigger lemons out there which VBs including myself have commented.

As usual all these will come back to haunt when interest rate start normalising and cost of capital goes up. Then we will know who has been swimming naked. Until then enjoy the view... Then again even at this environment there are those holding big lemons that have drowned

All said SG GLCs does tend to suit up and have a supplier for bathing suits on standby if 2009 was any indication:
https://www.valuebuddies.com/thread-1928...#pid132185
That doesn't mean capital loss is not a reality

[weijian]

Wow it’s been almost 4 years and I’ve to reread the acquisition presentation 😅

I think I was looking mainly on 1) in a bag of oranges there’s bound to be lemons in the package. And in this case the Nantong Nanchang Jinan seems like lemons with 80% occupancy even after operating 3-4 years. If it’s a sale and leaseback structure (cause we are unsure of the original owner) the WALES is also too short for comfort

2) This was a Covid year and their discount to valuation was quite small which will be detrimental when interest rate normalises. Share price was about $2 when REITs was doing well and now it’s back to $1.25 similar to pre 2019

Agree there are much bigger lemons out there which VBs including myself have commented.

As usual all these will come back to haunt when interest rate start normalising and cost of capital goes up. Then we will know who has been swimming naked. Until then enjoy the view... Then again even at this environment there are those holding big lemons that have drowned

All said SG GLCs does tend to suit up and have a supplier for bathing suits on standby if 2009 was any indication:
https://www.valuebuddies.com/thread-1928...#pid132185
That doesn't mean capital loss is not a reality

I am glad I was been cryptic so as not to over-embarrass myself.

I tend to think that it is actually easier for a "99% occupancy to drop to 80%" than for an "80% occupancy to increase to 90%". Both 99% and 80% occupancy are baked in the fair valuation. The former has a bigger downside risk while the latter has some upside.

Of course, current occupancy speaks nothing of the asset quality itself. So end of the day, we are really dependent on the Sponsor. When one buys Mapletree XXX Trust, one needs 99% faith in Mapletree Investments.

[specuvestor]

wow Weijian you are more optimistic than me in that the glass is half full

If it's a new factory, asset, fab etc the short term lower occupancy might not be meaningful as it ramps up but after some time it will be indicative of either the quality of asset or management is not satisfactory, or even the location is subpar. So when a factory utilisation is low and a company keep saying client ramp up is slower than expected, it's either management forecast is doubtful or too ambitious or the quality ie the capability of the factory is subpar (I'm thinking of an SGX company here)

It's not just simple % but what is the implication

Using a "safe" example: TSMC utilisation is always higher than say Chartered Semicon for decades unless there is sudden spike in demand and the orders overflow to Chartered. That says something.

It's not that different from renting out assets. If the rental rate is lower than market rate or occupancy lower than most, it signals something. Of course as usual companies are creative to reduce such signaling by having say master agreements for REITS for example to enhance valuations.

[weijian]

hi specuvestor,
I would think there is a big difference between mfg and real estate, but you are probably more right than wrong.

Since I am a cheerleader for AUM companies over AUO (asset under ownership) companies, I tend to be biased and so prefer to see half full glasses

[specuvestor]

Yes there’s a big difference between mfg and real estate Business but the concept of utilisation is fairly similar

And once these Asset cannot deliver comparable returns the narrative will shift to how much these Assets are worth 😄

With hindside now we can see the China occupancy is even lower now at 93% aggregated
https://www.mapletreelogisticstrust.com/..._final.pdf