MAPLETREE INDUSTRIAL TRUST
ME8U.SI
Mapletree Industrial Trust (MINT SP) - High-Spec outperforms
1Q results in line. Maintain BUY
- NPI and DPU formed 25.5% of our full-year estimates.
- Occupancy and efficiency gains YoY at High-Spec and Business Parks offset Factory weakness.
- We tweak FY17-19 DPU forecasts marginally +1.6%/-0.5%/- 0.8%, but re-peg our yield target to 6.5% from 7% on low interest rates, growth from high-spec developments phasing in, and ample debt capacity for acquisition/redevelopment growth.
- BUY, with TP revised 7% higher to SGD1.90.
Growth due to High-Spec and Business Parks
- Rev/NPI/DPU grew 3%/6%/4.4% YoY.
- Interestingly, gains were made despite overall occupancy falling 0.5ppts YoY to 93%. This was due to High-Spec and Business Park occupancy advancing 4.9ppts and 3ppts YoY to 94.1% and 89.2%, despite Factory (flatted, stack-up, light ind.) occupancy dropping 2.1ppts YoY to 93.1%. Rents at the former two are typically 1.6x and 3x more than at Factories.
- NPI margin for High-Spec also increased to 75% (FY16: c.69%) as efficiency gains kick in from increased occupancy. Portfolio rent reversions averaged c.3% (FY16: c.1.3%), healthy considering the current oversupply.
Sequential weakness at Factories a worry
- Sequentially, portfolio occupancy did slip 1.6ppts QoQ, led by Factories and Business Parks, which dropped 2.2ppts and 0.9ppts QoQ. High-Spec on the other hand gained 0.9ppts QoQ.
- While we’re confident that government incentives (The Singapore Fix, 29/6/16) are in place for businesses that need business park and high-spec space, we are more worried about the Factory portfolio, and cut occupancy assumptions there by 1.2ppts.
- Overall, we adjust FY17-19 DPU +1.6%/-0.5%/-0.8%.
Yield Compression
- MINT’s yield has compressed tremendously, by 11% or c.80bps YTD, to 6.5%, 70bps below a standard deviation below the mean. We expect this to be sustainable in a low interest rate, flight-to-safety environment. This is especially as the REIT is poised for DPU growth and revaluation gains from two High-Spec development projects, as well as implied acquisition/redevelopment potential from SGD400m of debt capacity.
Joshua Tan
Maybank Kim Eng
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Derrick Heng CFA
Maybank Kim Eng
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http://www.maybank-ke.com.sg/
2016-07-27
Maybank Kim Eng
SGX Stock
Analyst Report
1.90
Up
1.78
