Mapletree Industrial Trust - Phillip Securities 2018-01-24: Strategic Acquisition In US To Lift Portfolio

Mapletree Industrial Trust - Phillip Securities 2018-01-24: Strategic Acquisition In US To Lift Portfolio MAPLETREE INDUSTRIAL TRUST ME8U.SI

Mapletree Industrial Trust - Strategic Acquisition In US To Lift Portfolio

  • Mapletree Industrial Trust - Gross revenue 4.1% higher than expected; we under-estimated the impact of Phase 2 of the HP build-to-suit DPU consequently higher than our estimate by 3.6%
  • JV of 14 US data centres started contributing and mitigates domestic headwinds. 
  • Maintain NEUTRAL; higher target price of $2.15 (previously $1.99).

The Positives

  • ➕ Higher back-filling of space vacated by Johnson & Johnson at The Strategy. The vacated space (28% of NLA at The Strategy) is now 23% back-filled, which is slightly higher than the 15% reported in the previous quarter.
  • ➕ Gearing remains relatively low at 33.8%, albeit higher q-o-q from 30.0%. The increase in borrowings was to part fund the acquisition of the US data centres.
  • ➕ Enquiries are picking up at the Kallang AEI project. The manager reported that it has secured 12% commitment for 30A Kallang Place and Kallang Basin 4 Cluster asset enhancement initiative (AEI), improving the 3% that was stagnant over the previous two quarters. 
  • There are more enquiries for the property now that it is almost completed (expected to obtain temporary occupation permit in January or February). The manager has ~18% more in discussion and is optimistic on reporting 30% occupancy at the end of FY17/18 and 75% occupancy by the end of CY2018. Prospects are coming from technology companies such as software and information technology development.

The Negatives

  • ➖ Portfolio weighted average rental reversion of -1.18%. Dragged down by Flatted Factories (-1.6%) and Stack-up/Ramp-Up Buildings (-1.7%).
  • ➖ Marginally lower Singapore occupancy q-o-q from 90.4% to 90.1%. Dragged down by Flatted Factories (a larger tenant not fully renewing space) and Business Park Buildings (effect of J&J pre-termination). However, overall portfolio is marginally higher at 90.5%, after taking into account the 40% proportionate share of the US data centre portfolio that is 97.4% occupied.


  • The outlook is stable to positive. Oversupply situation is improving, with the tapering of new supply in 2018. 
  • Mapletree Industrial Trust has two projects coming on stream in 2018 – Kallang AEI (leasing is ongoing) and data centre BTS (no occupancy risk) which should contribute positively to the portfolio.

Maintain Neutral; higher target price of $2.15 (previously $1.99) 

  • We have revised our FY18e/FY19e revenue estimates 1.7%/3.9% higher than previous. DPU estimates for FY18e/FY19e have been raised 3.8%/9.2% higher. 
  • Key positives are the higher proportion of Hi-Tech Buildings segment in the portfolio following the injection of the US data centres, and the relatively low gearing. 
  • Estimated yield of 5.8% should be stable with some upside, but we find valuation un-compelling. Our target price represents an implied 1.48 times FY18e P/NAV multiple.

Relative valuation 

  • Mapletree Industrial Trust is trading above the peer average P/NAV multiple and at a lower 12M-trailing yield than the peer average.

Richard Leow CFA Phillip Securities | 2018-01-24
Phillip Securities SGX Stock Analyst Report NEUTRAL Maintain NEUTRAL 2.15 Up 1.990