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Mapletree Industrial Trust - DBS Research 2016-07-13: Fairly priced

Mapletree Industrial Trust - DBS Research 2016-07-13: Fairly priced MAPLETREE INDUSTRIAL TRUST ME8U.SI 

Mapletree Industrial Trust - Fairly priced

  • Revised estimates to account for higher and earlier-than-projected contribution for HP building.
  • Stock trading near record highs; positives priced in.
  • Upside to earnings will come from acquisitions or development projects.



Positives price in. 

  • We maintain our HOLD call for Mapletree Industrial Trust (MINT) on valuation grounds. 
  • We see MINT’s resilience as a value trait in this market and this has been reflected in its current share price. 
  • Our TP is raised to S$1.81 on the back of roll-forward valuations and raising our estimates from the built-to-suit project for Hewlett-Packard (HP).


Development projects to drive upside from FY18F onwards. 

  • MINT will only reap the benefits from the completion of development projects from 2HFY18F onwards (built-to-suit project for HP 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 would result in a rebound in DPU growth in the medium term. Eventual gearing will still remain at a conservative c.31%.


Low gearing a positive. 

  • MINT has a low gearing of c.25%, which makes it one of the lowest geared industrial REITs, offering the Manager significant debt-funded capacity for acquisitions or to undertake development by taking part in built-to-suit projects (BTS) or asset enhancement initiatives. 
  • We have not priced in any further acquisitions or developments (apart from those that have been announced) in our numbers.


Valuation:

  • We see MINT’s resilience as a value trait in this market and this has been reflected in its current share price. 
  • We maintain our HOLD recommendation with roll-forward TP of S$1.81.


Key Risks to Our View:

  • Rising interest rates An increase in refinancing rates will negatively impact distributions. However, we note that MINT has minimised these risks by having c.88% of its interest cost hedged into fixed rates.




Derek Tan DBS Vickers | Mervin Song CFA DBS Vickers | http://www.dbsvickers.com/ 2016-07-13
DBS Vickers SGX Stock Analyst Report HOLD Downgrade BUY 1.81 Up 1.64


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