Mapletree Industrial Trust (MINT SP) - Stability and Growth
Initiate at BUY, TP SGD2.00
- MINT’s Singapore-focused industrial portfolio stands out for its resilience and clear growth attributes, underpinned by a large, well-diversified tenant base, with rising contribution from ongoing redevelopment and AEI projects to support an estimated 5.4% DPU CAGR till FY19E.
- MINT stands tall on all balance sheet metrics, and with debt headroom estimated at 30% of market cap, is well-placed to deliver on inorganic growth opportunities, which should drive upside to DPU forecasts and valuations.
- Initiate at BUY with DDM-based TP of SGD2.00, implying 18% total return upside.
- MINT’s strengths lie in
- its solid management track record, which has helped deliver steady DPU growth since IPO in 2010, led by strong rental reversion momentum from an under-rented portfolio, and
- assets skewed towards multi-tenanted properties (93% of gross revenue) suggesting low conversion risk.
- These are defensive qualities against challenging near term industrial oversupply headwinds.
Clear growth profile
- MINT’s growth drivers are visible and will be led by rising contribution from its ongoing redevelopment initiatives
- (SGD226m build-to-suit [BTS] facility for Hewlett-Packard,
- SGD77m AEI project at Kallang Basin 4 Cluster by 1Q18, and the recently announced
- SGD60m BTS data centre project),
Superior balance sheet metrics
- MINT stacks up well on all key balance sheet metrics, with lowest funding cost amongst the industrial REITs at 2.6%, and weighted average debt tenure at 3.2 years.
- With gearing at 29.4%, and debt headroom at 30% of market cap, MINT is well-positioned for inorganic growth opportunities, both in Singapore and overseas.
- Earlier-than-expected pick-up in leasing demand driving improvement in occupancy.
- Better-than-anticipated rental reversion trend.
- Accretive acquisitions.
- Prolonged slowdown in economic activity could reduce demand for industrial space, resulting in lower occupancy and rental rates.
- Termination of long-term leases contributing to weaker portfolio tenant retention rate.
- Sharper-than-expected rise in interest rates could increase cost of debt and negatively impact earnings, with higher cost of capital lowering valuations.