Mapletree Industrial Trust - Maybank Kim Eng 2015-10-21: More organic growth plans

MAPLETREE INDUSTRIAL TRUST ME8U.SI

Mapletree Industrial Trust - More organic growth plans

Results in-line. Growth driven by BTS-Equinix and improved occupancies. But rent reversions generally flat to negative.
Asset enhancement initiative (AEI) at Kallang Basin 4 to add 317k GFA of high-spec space.
MINT has a solid organic growth profile. We tighten our yield target to 7.25% and raise TP 4% to SGD1.49.
Maintain HOLD.

In 2Q3/16, revenue and NPI came in at SGD82.2m (+6.2%YoY, +1.4%QoQ) and SGD61m (+8.6%YoY, +1.4%QoQ), while distribution per unit (DPU) was 2.79 Scts (+7.3%YoY, +2.2%QoQ).
Results were in-line, accounting for about 52% of our full year expectations. Growth was driven by BTS-Equinix continued contribution, as well as improving portfolio occupancies, which have risen for three quarters now: 90.2% (4Q), 93.5% (1Q) and 93.8% (2Q).
Rent reversions so far this year averaged flat to negative: +0.3% for factories (67% NPI), -4.6% for business parks (14% NPI). The weak reversions reflect an over-supplied market, which will persist until 2016.
Occupancy can be maintained, so long as rents remain restrained. JTC’s recent relaxing of the anchor tenant rule (anchor tenants to occupy 1000sqm from 1500sqm) should help as well.

The current DPU growth trajectory is mainly due to build-to-suit projects Equinix and Hewlett Packard (from 3Q3/17E).
In addition, a new 317k sf High-Tech facility (from 4Q3/18E) will be built at Kallang Basin 4’s car park. Capex is ~SGD77m, and management expects an 8% yield on the project. This AEI and better than expected occupancies lifts our FY3/16-18E DPU estimates from 10.6/10.7/11.8 to 10.7/10.8/11.9 Scts. The full impact of these initiatives will be felt in FY3/19E when DPU could hit 12.4 Scts.
As the DPU growth trajectory is fairly certain, we tighten MINT’s target yield from 7.5% to 7.25%, which when applied to FY3/17E’s DPU lifts our TP from SGD1.43 to SGD1.49.
Maintain HOLD.

Joshua Tan Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2015-10-21

Maybank Kim Eng SGX Stock Analyst Report HOLD Maintain HOLD 1.49 Up 1.43