MAPLETREE INDUSTRIAL TRUST
ME8U.SI
Mapletree Industrial Trust: Decent results, but soft rental reversions
2QFY16 DPU grew 7.3% YoY
Challenging leasing market
AEI to support growth
2QFY16 results ahead of our expectations
- Mapletree Industrial Trust (MIT) reported 2QFY16 revenue of S$82.7m, representing an increase of 6.2% YoY. DPU rose 7.3% to 2.79 S cents, and was above our expectations largely due to a higher-than-expected NPI margin of 73.8% (+1.6 ppt YoY).
- For 1HFY16, MIT’s gross revenue was up 5.1% to S$164.4m, and this constituted 50.7% of our FY16 projection. DPU of 5.52 S cents translated into a growth of 8.0%, forming 52.8% of our full-year forecast.
- Operationally, MIT’s occupancy improved slightly on a QoQ basis from 93.5% to 93.8%, while overall average portfolio passing rent rose marginally from S$1.86 psf per month in 1QFY16 to S$1.88 psf per month in 2QFY16.
Some negative rental reversions recorded
- Nevertheless, given the challenging leasing market, MIT saw a second consecutive quarter of negative rental reversions for renewal leases for its Business Park Buildings (-1.5%) and StackUp/Ramp-Up Buildings (-2.5%) segments.
- Rental reversions for its Flatted Factories and Hi-Tech Buildings also came in relatively subdued at 1.7% and 0.5%, respectively, and were softer than the 3.6% and 1.9% delivered in 1QFY16.
- Given the lacklustre operating landscape, management has sought to enhance its portfolio specifications by announcing an AEI at Kallang Basin 4 Cluster to grow its Hi-Tech Buildings segment. This involves building a new 11-storey Hi-Tech Building and carrying out improvement works to existing buildings. This would add an additional GFA of 317,000 sq ft and is expected to be completed by 4QCY17.
- We expect this S$77m initiative to be financed by debt, given MIT’s healthy aggregate leverage ratio of 29.7%. 80% of its debt has been fixed/hedged.
Upgrade to HOLD
- We raise our FY16 and FY17 DPU projections by 3.7% and 2.8%, respectively, as we input higher occupancy and NPI margin assumptions in our model. Consequently, our DDM-derived fair value estimate increases from S$1.34 to S$1.36. Coupled with a 3.8% decline in MIT’s share price since we downgraded the stock to a ‘Sell’ on 21 Jul 2015, we now see limited downside returns ahead.
- Upgrade to HOLD.
Wong Teck Ching Andy
OCBC Securities
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http://www.ocbcresearch.com/
2015-10-20
OCBC Securities
SGX Stock
Analyst Report
1.36
Up
1.34
