MAPLETREE INDUSTRIAL TRUST
ME8U.SI
Mapletree Industrial Trust (MINT SP) - Resilient now, growth next!
7.7% forward yield. Upgrade to BUY.
- FY3/18 DPU growth of 9% to 12 Scts should be well supported by major project with Hewlett-Packard contributing. Thus we roll-over our valuations to that year, pegged to a 7% yield target, tightened from 7.25% to reflect the higher quality portfolio of MINT, as NPI contributions from high-spec and business parks are expected to rise to 42% from 33%.
- Upgrade to BUY, TP revised to SGD1.71 from SGD1.50.
- Attractive forward yield of 7.7% for a Temasek-backed REIT.
Good demand for business parks and high-spec
- Latest JTC numbers show that business park demand in 2015 exceeded supply (2.4m sf vs 1.9m sf), in what was a strongly supplied year (10.1% increase in total stock) amid weak economic conditions.
- We reckon that this bodes well for high-spec space as well, which is business park like in its fittings.
- MINT is currently 33% exposed to both categories, and this exposure will increase to 40% by FY3/18, and 42% by FY3/19.
Occupancy increased over last four quarters
- In line with this, MINT’s leasing has outperformed expectations. Occupancy improved across all product categories over the last four quarters: High-Spec (ex. BTS), Business Parks, and even Factories.
- We expected 87.9% and 87.7% for the first two but both have already exceeded 90%. We expect this to be defended in FY3/17 and increase our occupancies in both product categories by c.2.6ppts to be in line with where they are now.
- However, we anticipate Factory occupancy to drop by 2ppts as the product is more oversupplied.
- Overall effect raises FY3/16-17 DPUs by 0.9% and 1.4% to 11 Scts both years.
Clear DPU growth profile
- On the other hand, FY3/18 DPU could rise by 9.1% to reach 12 Scts as contributions from the Hewlett Packard build-to-suit will mostly phase-in that year, implying that MINT trades at an attractive forward 7.8% yield.
- BTS share of NPI will jump from 3% to 10% in FY3/18 then 12% by FY3/19. FY3/19 should also see the new 317k sf high-spec building at Kallang iPark contributing.
Swing Factors
Upside
- Occupancy continues to outperform expectations.
- Spot rents reverse negative trends, thereby arresting softening rent reversions.
- MINT’s debt headroom is comfortably c.SGD400m before aggregate leverage hits 40%, which gives it ample firepower for acquisitions and asset enhancement.
Downside
- Occupancy and rent reversions go south, as 2016 is still an oversupplied market.
- Non-accretive acquisitions. Business park NPI yields are c.6%, below MINT’s current traded yield.
- Interest cost rise faster than expected. We have factored in two rate hikes for 2016.
Joshua Tan
Maybank Kim Eng
|
http://www.maybank-ke.com.sg/
2016-02-15
Maybank Kim Eng
SGX Stock
Analyst Report
1.71
Up
1.50
