Bond-like investment with potential increase in principal
We took management on the road to meet investors and came away positive on MMLP’s business outlook. MMLP is one of few companies that offers exposure to the exciting developments in Indonesia such as infrastructure development, rising e-commerce & logistic industries and lower interest rates. MMLP targets to triple its current 164k sqm NLA to 500k sqm in three years. Further, MMLP plans to team up with prominent names in the logistics business to strengthen its franchise and invite cheaper capital. We maintain our BUY rating with a new target price of Rp1,020/sh (from Rp1,035).
On the right spot MMLP is one of few companies that offers exposure to the exciting developments in Indonesia such as infrastructure development, rising e-commerce & logistic industries and lower interest rates. MMLP targets to grow its NLA to 500k sqm in three years, more than triple the current 164k sqm NLA; currently MMLP has 96k sqm NLA in the pipeline. We expect MMLP to grow NLA to 355k sqm NLA by 2018CL.
Competitive edges Some investors wonder what the key factor was when Unilever decided to go with MMLP and what MMLP’s competitive edges are. MMLP’s founders saw the longer-term opportunities that potentially arise from a rising consumer industry and infrastructure developments. Ahead, we expect a cheaper cost of capital for this pure-play warehouse developer, client list track-record, strategic assets locations and prominent partner(s) will act as competitive edges for MMLP and support its performance.
Affiliated business Some investors ask about the potential conflict of interest with its affiliated property business. MMLP plans to have a certain minimum yield-to-cost for every new investment and also plans to execute the expansions through JV companies with third-party investors. Hence, we see any affiliated transaction will eventually need to be justified by the investment thresholds and partners in the JV companies.
A bond-like investment but with potential increase in principal As an investment property company, the cashflow structure mimics a bond but with potential increases in principal value, which will be a function of property prices. In the future, MMLP has the option to monetize the ongoing projects to REITs when the company encounters better investment opportunities. We tweak our forecast to adjust for its latest results and capex; we maintain our BUY rating with new target price of Rp1,020/sh. $MMLP $UNVR