Daiwa House Logistics Trust vs Mapletree Logistics Trust

This will be just a short post.
Basically, I view Mapletree Logistics Trust (MLT) as a bellwether logistic S-Reit listed in Singapore. Hence, the recent announcement of the Daiwa House Logistics Trust (DLHT) IPO made me think about how it (DLHT) compares to MLT.

Daiwa House Logistics Trust’s (DLHT) public offer will close on Wed Nov 24, 2021) at 12.00 pm. The REIT will commence trading on a “Ready” basis on Fri Nov 26, 2021 at 2.00 pm.

Disclaimer: I am currently vested in MLT.

Please refer to the simple comparison table below.

In summary, the Price/NAV of Daiwa House Logistic Trust appear low. Its gearing ratio should as stated by its CFO drop to 33.1% (read here).

Daiwa’s WALE (by NLA) at 7.2 years is long.

The forecasted distribution yield is high at 6.3% in 2021.

The above-mentioned are all good points.
However, as with all IPOs, there is a lot of unknown (which will be played out in the longer term). Moreover, Daiwa House Logistics Trust’s dividend yield will probably drop once its distribution policy change from 100% to 90% from 2023 onwards.

Let’s go a little further into the details (below).

Geographical Diversification vs Concentration risk

For Daiwa House Logistics Trust’s (DLHT), given its comparatively small portfolio of 14 logistic and industrial properties in Japan, there is a fair amount of concentration risk.

Nevertheless as stated in the IPO prospectus, the assets are well diversified across Japan, located in both Greater Tokyo as well as core regional areas, mitigating concentration risk. These are strategically located properties closely interlinked with transportation and shipping networks

For MLT on the other hand, Japan logistics properties account for only 11.2% of Assets under management and 10% of the gross revenue. That is 18 of its 163 properties are located in Japan.
Nevertheless, as a retail investor from Singapore, I would probably like a significant portion of the assets to be in Singapore (which I am more familiar with). In the case of MLT, Singapore assets account for almost a quarter of the assets under management. Overall, MLT’s Singapore assets portion still account for the major portion of its gross revenue.

In addition, for MLT’s Japan properties, the occupancy rate is 96.2% on Sept 21 (see below).

Tenant base

Pertaining to the major tenants of Daiwa House Logistics Trust’s (DLHT), it was stated in the prospectus that the high occupancy rates across the IPO Portfolio are anchored by a diversified blue-chip tenant base. See below table.

With the exception of one 3PL operator, no single tenant accounts for more than 10% of NPI of
the IPO Portfolio, translating to low concentration risks. Moreover, the tenant base is well-diversified across multiple sectors including 3PL, E-commerce, retail and manufacturing.

None of the top 10 tenants are related to the Sponsor, or to each other. The aggregate contribution of the
top 10 tenants as a percentage of NPI of the IPO Portfolio for FY2020 was 71.1%.

Nevertheless, it can’t be compared to the diversity of MLT’s tenant base. Whereby the top 10 tenants across different geographical locations account for only around 25.4% of gross revenue. See below.

Lease Expiry Profile (by NLA)

Looking at DLHT’s lease expiry profile is fairly decent (see below); with the majority (75.2%) being under multi-tenant assets.

See below for MLT’s Lease Expiry Profile (by NLA). Likewise, for MLT, the majority of the gross revenue is from multi-tenant buildings (67.6%).

I would argue that DLHT’s lease expiry profile is better (which is more backloaded to FY2026 onwards as compared to MLT’s).

DHLT Future Expansion pipeline

In the DHLT’s prospectus, there is the mention of a visible growth trajectory in the future, which may possibly (more than) triple the IPO GFA. The expansion will be via assets in Southeast Asia (namely Indonesia, Vietnam and Malaysia) and Japan. And yes notably, there appear to be no plans for Singapore.

It is like the start of MLT, although it will still be less diversified than MLT (which include assets in Singapore, Hong Kong, China, South Korea, Australia and India). Nevertheless, MLT’s asset mix may change in the future as well.

Final Thoughts

There are many good points about Daiwa House Logistics Trust’s (DLHT).

However, for me who is already vested in MLT, which already have properties in Japan, I do not see any compelling need to further invest in Daiwa House Logistics Trust (other than the higher yield and WALE perhaps).
Nevertheless, ultimately that is just my personal view, please DYODD.

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