MAPLETREE INDUSTRIAL TRUST
ME8U.SI
Mapletree Industrial Trust - Stable portfolio amid challenging environment
- S$84.09mn gross revenue in line with consensus expectations of S$83.0mn and our expectations of S$81.96mn.
- 2.85 cents DPU exceeded consensus expectations of 2.70 cents by 5.5%; and exceeded our expectations of 2.69 cents by 5.9%.
- Stable occupancy and higher average portfolio passing rent.
Some one-offs in headline Gross revenue
- Management shared that Gross revenue was boosted by non-core items such as property tax refund of c.S$400,000 and c.$600,000 for reinstatement compensation. These non-core items had a 0.04 cents positive impact to DPU.
Higher portfolio average passing rent, but some weakness in the portfolio
- Portfolio occupancy rate remains healthy at 93.0% and average portfolio passing rent increased marginally to S$1.92 psf/mth from S$1.90 psf/mth q-o-q. However, Management shared on some weakness in terms of lower occupancies for some Building segments.
- Weakness also came from tenants who are opting for shorter 3- year leases, instead of the longer 5-year leases in view of uncertainty over their own business outlook.
- Space demand has been mixed, with Management sharing that some renewals were for larger spaces, while some renewals were downsized. There were also instances of early termination and Management is not so optimistic on securing forward renewals.
Capital management: Debt hedged at fixed-rate to drift downwards from 87.6% to c.70% during FY17
- Based on disclosure (Note 18) in the latest Annual Report, MINT has some S$470mn in notional value of interest rate swaps (IRS) maturing at various times during FY17.
- Management shared that the hedged portion of debt would consequently drift downwards as the IRS progressively mature.
- We are expecting some cost savings for MINT from lower interest expense if the low interest rate environment persists. We had highlighted in our recent S-REITs sector report (18 July 2016) that potential beneficiaries of the low interest rate environment would be the REITs with "significant proportion of debt due for refinancing now, or significant proportion of debt on floating-rate".
Maintain "Neutral" rating with unchanged DDM valuation of S$1.72
- We have tweaked our revenue assumptions 2.3%/0.6% higher for FY17e/FY18e; respective DPU is consequently 3.4%/0.3% higher.
- We believe the FY17e forward yield of c.6.2% should be sustainable, underpinned by the portfolio's stability and resilience.
- Our target price of S$1.72 gives an implied forward 1.26x P/NAV multiple (5-year historical forward average: 1.20x, +1 std. dev: 1.28x).
Richard Leow CFTe
Phillip Securities
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http://www.poems.com.sg/
2016-07-27
Phillip Securities
SGX Stock
Analyst Report
1.72
Same
1.72
