Mapletree Industrial Trust - DBS Research 2016-07-27: Executing a master stroke

MAPLETREE INDUSTRIAL TRUST ME8U.SI

Mapletree Industrial Trust - Executing a master stroke

We turn positive on Mapletree Industrial Trust (MINT) with a steady DPU growth profile of 2.3% (vs 1.2% industrial REIT average).
The REIT offers high earnings visibility and we have confidence that the Manager has the flexibility to execute on more developments to exploit its conservative balance sheet. This implies potential upside to earnings.
Upgrade to BUY with a higher TP of S$1.90.

Contribution from the new HP property is timely just when the REIT is facing rental pressure on its portfolio. The restructuring of the rent free period is a positive surprise.
The redistribution of the six-month rent free periods for both phase 1 (completing in 4QCY16) and phase 2 (completing in 2QCY17) over the first 18 months will mean a more even distribution in topline and costs incurred for the REIT. This implies minimal downside to DPU in 2017 which was a concern for investors.

MINT’s balance sheet is lowly geared at c.25%, which is one of the lowest in the industrial REIT sector, and gives the Manager significant debt-funded capacity for acquisitions or to undertake developments by taking part in built-to-suit projects (BTS) or asset enhancement initiatives.
We have not assumed any further acquisitions or developments (apart from those announced) in our forecast.

MINT’s resilience is a value trait in this market and this has yet to be reflected in its current share price. We upgrade the stock to BUY with revised TP of S$1.90.

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/ 2016-07-27

DBS Vickers SGX Stock Analyst Report HOLD Downgrade BUY 1.90 Up 1.81