Mapletree Industrial Trust - UOB Kay Hian 2017-01-25: 4Q16 Results Of MIT (Above)

REITs − Singapore - UOB Kay Hian 2017-01-25: 4Q16 Results Of KREIT (Below), MIT (Above), ART (In Line) MAPLETREE INDUSTRIAL TRUST ME8U.SI

REITs − Singapore - 4Q16 Results Of KREIT (Below), MIT (Above), ART (In Line)

  • Mapletree Industrial Trust (MIT)’s results came in slightly above expectations; maintain HOLD with a target price of S$1.60. 



WHAT’S NEW

  • Keppel REIT (KREIT), Mapletree Industrial Trust (MIT) and Ascott REIT (ART) have reported their quarterly results.


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Results slightly above expectations. 

  • Maintain HOLD with an unchanged target price of S$1.60 based on DDM (required rate of return: 6.6%, terminal growth: 1.1%).
  • Mapletree Industrial Trust (MIT) reported 3QFY17 DPU of 2.83 S cents (+0.4 % yoy).
  • 3QFY17 gross revenue was up 1.4% yoy on higher rental rates across all segments and maiden contribution from Phase 1 of the HP project. 
  • NPI increased 2.5% yoy due to lower property expenses. 
  • The results were slightly above expectations, with 9MFY7 DPU representing 78% of our full-year estimates.

Overall positive rental reversions in 3QFY17. 

  • Sub segments which saw positive rental reversions included stack-up/ramp-up (+3.5%), flatted factories (+2.3%), hi-tech (+0.5%), thought business park reversions were flat.

Johnson & Johnson lease termination. 

  • Accounting for 2.2% of MIT's gross revenue, J&J will terminate its lease on 30 Sep, nine months ahead of schedule. J&J will pay S$3.1m in compensation to the REIT manager (roughly 6 months’ rent).The S$3.1m will likely be paid out in 2H17 onwards. 
  • No tenant has been found to backfill the space (159k sf) as yet, and management expects 9-12 months of downtime Likelihood of negative rental reversions in FY18. 
  • Management previously alluded to the likelihood of negative reversions (up to -3%) for flatted factories and stack-up/rampup in FY18. These segments account for the bulk of the 31% in expiring leases come FY18 (>20%). 
  • With the focus on tenant retention and maintaining high occupancy (at least 90%), management has hinted at greater flexibility on rents, especially in these two segments.

Challenging outlook to exert pressure on rental and occupancy. 

  • Management expects the muted global economic outlook, supply headwinds and domestic economy restructuring to weigh on the sector, putting pressure on rentals and occupancy. Its strategy is to focus on tenant retention, and shift towards performance-based contracts where feasible. 
  • About 6.8% of leases by gross rental are due in FY17.







Vikrant Pandey UOB Kay Hian | Derek Chang UOB Kay Hian | http://research.uobkayhian.com/ 2017-01-25
UOB Kay Hian SGX Stock Analyst Report HOLD Maintain HOLD 1.600 Same 1.600





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