Mapletree Industrial Trust - DBS Research 2016-01-06: Rock-solid performer

Mapletree Industrial Trust - DBS Research 2016-01-06: Rock-solid performer MAPLETREE INDUSTRIAL TRUST ME8U.SI 

Mapletree Industrial Trust - Rock-solid performer 

A more modest growth profile. 

  • DPU growth over the coming two years is likely to turn more modest at c.1.5% per annum for Mapletree Industrial Trust (MINT) as under-rented portfolio gets marked-to-market over time. 
  • In this current tough operating climate, we expect the manager to focus more on maintaining occupancy rates instead of focusing on pushing rents higher. Therefore, we expect rental reversions to moderate to c.0-3% in the coming years. 

Steady operational 2Q16 results. 

  • Operational data-points in 2Q16 results remain steady – occupancy rates remain steady at 93.6%, while average monthly portfolio rentals continue to inch up to S$1.88psf albeit at a slower rate. 
  • DPU of 2.79 Scts (+2.2% y-o-y) is slightly ahead of expectations as the manager continues to keep costs tight. 
  • We tweak our numbers up by 2% to account for better-than-expected margins. 

Development projects to drive upside from FY18F onwards. 

  • MINT will reap the benefits from the completion of development projects from FY17F onwards (built-to-suit project for Hewett Packard and a new Hi-tech building at Kallang Basin 4 cluster). At a total estimated cost of c.S$250m, we estimate returns of c.8.5% which will result in a rebound in DPU growth in the medium term. 
  • Eventual gearing of 34.6% will still be within management’s comfortable range of 35- 40%. 


  • We see MINT’s resilience as a value trait in this market and believe yields of 7.1%-7.5% as attractive for a solid name. 
  • We maintain BUY with TP of S$1.62, offering total return of 12%. 

Key Risks to Our View: 

  • Rising interest rates An increase in refinancing rates will negatively impact distributions. However, we note that MINT has minimized these risks through having c.80% of its interest cost hedged into fixed rates. 

Derek Tan DBS Vickers | Mervin Song CFA DBS Vickers | http://www.dbsvickers.com/ 2016-01-06
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 1.62 Same 1.62