Mapletree Industrial Trust - UOB Kay Hian 2017-07-26: 1QFY18 Results Of MIT In-line

Mapletree Industrial Trust - UOB Kay Hian 2017-07-26: 1QFY18 Results Of MIT In-line MAPLETREE INDUSTRIAL TRUST ME8U.SI

Mapletree Industrial Trust - 1QFY18 Results Of MIT In-line

  • Results of Mapletree Industrial Trust (MIT) in line with our expectations. 
  • Despite early and positive signs from the manufacturing sector, MIT’s management believes supply headwinds will continue to pressure rental and occupancy rates. 
  • Maintain HOLD on MIT with a target price of S$1.78. 
  • Maintain OVERWEIGHT on the sector.



WHAT’S NEW


Results in line with expectations. 

  • Maintain HOLD with a target price of S$1.78. Our valuation is based on DDM (required rate of return: 6.6%, terminal growth: 1.7%).
  • MIT reported a 1QFY18 DPU of 2.92 S cents, up 2.5% yoy. Results were consistent with our expectations, with 1QFY18 DPU representing 25.4% of full-year estimate.
  • Gross revenue and NPI grew by 5.6% and 6.9% yoy, respectively. Growth was attributed to revenue contribution from Phase 1 of the build-to-suit project for HP Singapore.
  • 1QFY18 portfolio rent up 0.5% qoq at S$1.95 psf pm, while overall occupancy rate shrunk 0.5ppt qoq to 92.6% in 1QFY18, due to lower occupancies at flatted factories (- 0.8ppt qoq) and hi-tech buildings (-1.7ppt qoq). However, tenant retention rate rose 6.1ppt qoq to reach 74.8% in 1QFY18.

Marginally higher passing rents for hi-tech buildings, business park buildings, stackup/ramp-up buildings and light industrial buildings – up 4%, 0.5%, 0.8% and 1.5% qoq, respectively. 

  • Passing rents for flattened factories remained the same. Passing rents for hi-tech buildings, business park buildings, stack-up/ramp-up buildings and light industrial buildings grew to S$2.40, S$3.80, S$1.30 and S$1.32 psf pm, respectively; passing rents for flattened factories remained at S$1.80 psf pm.

HP BTS building Phase 2 TOP. 

  • The S$226m project is 100% committed by HP for 10.5+5+5 years. HP is MIT's largest tenant (5.3% by gross rental income) and has completed Phase 2, which received TOP in Jun 17. 
  • Phase 2 first commenced with a two-month rent-free period; another two-and-a-half month rent-free period will be distributed equally over 2018 to 2020.

Divestment of 65 Tech Park Crescent in July. 

  • The S$17.688m sale price for the property came above both the acquisition price of S$13.2m and book value of S$17.6m.
  • The property contributed 0.3% of MIT’s gross revenue in FY17; proceeds from the sale will be used to fund committed development projects.

Challenging outlook to exert pressure on rental and occupancy. 

  • Despite early, positive signs from the manufacturing sector, management believes that supply headwinds will continue to pressure rental and occupancy rates. 
  • Management will have a continued focus on asset management and tenant retention.




Vikrant Pandey UOB Kay Hian | http://research.uobkayhian.com/ 2017-07-26
UOB Kay Hian SGX Stock Analyst Report HOLD Maintain HOLD 1.780 Same 1.780



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