Mapletree Industrial Trust (MINT SP) - Maybank Kim Eng 2017-04-18: Stability and Growth

Mapletree Industrial Trust (MINT SP) - Maybank Kim Eng 2017-04-18: Stability and Growth MAPLETREE INDUSTRIAL TRUST ME8U.SI

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.


Resilient portfolio 

  • MINT’s strengths lie in 
    1. 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 
    2. 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 
    1. (SGD226m build-to-suit [BTS] facility for Hewlett-Packard, 
    2. SGD77m AEI project at Kallang Basin 4 Cluster by 1Q18, and the recently announced 
    3. SGD60m BTS data centre project),
    which in aggregate should help drive an estimated 3Y DPU CAGR of 5.4%. These should offset softer near term organic fundamentals at its existing portfolio, with greater emphasis towards tenant retention dampening prospects of rental growth.


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.


Swing Factors


Upside

  • Earlier-than-expected pick-up in leasing demand driving improvement in occupancy.
  • Better-than-anticipated rental reversion trend.
  • Accretive acquisitions.

Downside

  • 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.




Chua Su Tye Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2017-04-18
Maybank Kim Eng SGX Stock Analyst Report BUY Initiate BUY 2.00 Up 1.900



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