Acquiring a Modern Automated Logistics Property for RM180mn

CapitaLand Malaysia Trust (CLMT) has signed a conditional sale and purchase agreement to acquire a freehold automated logistics property, Elmina Logistics Hub, from PTT Logistics Hub 1 Sdn Bhd for RM180mn. The property is in Elmina Business Park – see Appendix 1, a well-established industrial and business hub in Selangor.

An independent valuation by JLL Appraisal & Property Services Sdn. Bhd. has assessed the property’s market value at RM180.5mn, aligning closely with the agreed purchase price.

The Elmina Logistics Hub, currently under construction, is expected to be completed in the first half of 2025. Upon finalising the sales and purchase agreement, CLMT will enter into a 10-year lease agreement with Projek Tetap Teguh Sdn. Bhd., a subsidiary of PTT Synergy Group Berhad, with options to renew for two additional terms of five years each. The acquisition will be entirely funded through bank borrowings and is targeted for completion by the fourth quarter of 2025.

More About the Subject Property

Elmina Logistics Hub is a 40-meter-high, single-storey automated warehouse equipped with an Automated Storage and Retrieval System (ASRS). This computer-controlled system leverages cranes and robotics to automate the storage and retrieval of goods, optimising warehouse operations. By enhancing space utilisation, increasing speed and accuracy, and minimising labour costs and human error, ASRS represents a cornerstone of modern logistics management. The facility also boasts 19 loading bays with hydraulic dock levellers and has a capacity to handle over 30,000 pallets. Refer to Appendix 3 & 4 for property details.

Fully Tenanted With 6.8% Yield

The fully tenanted Elmina Logistics Hub is expected to generate an annual gross rental income of RM12.3mn, resulting in an initial gross yield of approximately 6.8%. We consider this yield competitive, as it aligns with the typical rental yield range for industrial properties, which typically ranges from 6.0% to 8.0%. Additionally, the 10-year lease agreement, which incorporates built-in rent escalations (refer to Appendix 5), is anticipated to strengthen the portfolio's income stability over the long term.

Our View

We view this acquisition positively as it aligns with CLMT's growth strategy and diversification efforts. The addition of the Elmina Logistics Hub will expand CLMT’s portfolio to 11 properties and double the proportion of its new economy assets from 3% to 6% of its total portfolio by assets under management. We estimate that this acquisition will lead to a slight increase in CLMT's gearing ratio, from 42.1% at the end of September 2024 to 44.1%.

Impact

Assuming a net property income margin of 85% and lease commencement in October 2025, the proposed acquisition is projected to boost our earnings forecasts by 1.8% in FY25 and 6.5% in FY26. However, we maintain our current earnings forecasts until the deal is finalised.

Valuation

We maintain our Buy recommendation on CLMT with an unchanged TP of RM0.82, based on a target yield of 6.25% and a 3% ESG premium.

Source: TA Research - 3 Dec 2024