Monday, June 22, 2015

Mapletree Logistics Down 10%, Cheap Enough to Buy?

Mapletree Logistics Trust (MLT) is down 11.5% from its recent high of 1.26 in April 2015.

If you measure from it's 2013 high in May when all the REITs were going ballistic, the drawdown is about 17%.

With the recent correction in MLT, do I think that it is a good buy?

Fundamentally, I think it is all right. It's properties are quite diversified and looks good to me. However, valuations perhaps is not so ideal.

Historically, its average premium is about 5%, which is the expected premium of industrial type buildings, although logistics seems to be a subset of industrials in this case.

It now has a P/NAV premium of 10% which I do not particularly like. Yield is a decent 6.6%. 

The "premium" is off it's crazy levels of 20-30%, which I find is a good thing. During the 2013 REITs run-up, the premium hit 50% intra-quarter which is just absurd.

Looking at the small picture, this 10% correction looks to be a decent level for accumulation. However, when looking at the big picture, this move is nothing. During the GFC, the share price of MLT dropped 65%, which makes this 10% drop look very paltry.

I like the company, but I don't like the price. I continue to watch it, but it is unlikely I will make any moves soon.

Some might think that I am being too greedy with my margin of safety, but hey, to each their own, yeah?

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