Mapletree Industrial Trust - CIMB Research 2018-04-25: 4QFY18 Growth Trajectory Intact

MAPLETREE INDUSTRIAL TRUST ME8U.SI

Mapletree Industrial Trust - 4qfy18 Growth Trajectory Intact

Mapletree Industrial Trust's FY18 DPU of 11.75 Scts (+3.2% y-o-y) was in line with consensus and our expectation, at 101% of our FY18F. 4QFY18 DPU of 2.95 Scts (+2.4% y-o-y) was at 25%.
Growth was driven by contribution from the BTS for HP and contribution from Mapletree Industrial Trust’s 40% stake in 14 data centres in the US.
AEI at 30A Kallang Place was completed on 13 Feb. The manager is signing S$3.50-3.80 psf pm for the property, and it has secured c.40% commitments.

Backed by full-year contribution from US data centre acquisition, ramp-up of 70A Kallang Place and BTS data centre in FY20F, we project 2-year DPU CAGR of 4.6%.
ADD maintained. Downside risks include higher rate hikes and valuation risk.

Mapletree Industrial Trust's 4QFY18 DPU grew 2.4% y-o-y, driven by contribution from the build-to-suit (BTS) for HP as well as contribution from its 40%-stake in 14 data centres in the US. This was partially offset by lower portfolio occupancy.
Mapletree Industrial Trust’s Singapore portfolio increased by S$159.7m (revaluation gain of S$65.5m and capitalised cost of S$111.8m from development works); its US data centres registered an increase of US$7m in valuation vs. previous valuation in Sep 2017.
NAV increased to S$1.47/unit (FY17: S$1.41).

Singapore portfolio occupancy fell 0.5% pt q-o-q to 89.6% due mainly to an increase in leasable area upon completion of the asset enhancement initiative (AEI) at 30A Kallang Place on 13 Feb.
The manager is signing S$3.50-3.80 psf pm for the Hi-Tech building. It has secured c.40% commitments and the manager is targeting 90% committed occupancy by end-2018. Meanwhile, US portfolio occupancy remained stable at 97.4%.

Flatted factories, stack-up/ramp-up and light industrial buildings saw negative 1.6-3.8% reversions for renewals. As supply drops off in 2019, we believe that dicey conditions could ease towards year-end.
The Strategy signed a sizeable lease at S$3.12 psf pm (c.18% discount to Mapletree Industrial Trust’s business parks’ passing rent) as it sought to backfill the space vacated by J&J (c.160k sq ft; 23% has since been back-filled). Lastly, HGST could downsize at the Kaki Bukit cluster; in turn, this allows the possibility of redevelopment.

Gearing improved to 33.1% (end-2017: 33.8%), with borrowing costs stable at 2.9% p.a. 85% of Mapletree Industrial Trust ’s borrowings is fixed/hedged.
We note that FY18 borrowing costs increased c.25% y-o-y due largely to higher debt to fund the US data centres, higher hedged rates and interest for HP which is now being expensed, instead of being capitalised.

We decrease our FY19F-20F DPU by 1.3-1.4% as we factor in higher borrowing costs. Our DDM-Target Price accordingly dips to S$2.12.
We forecast a 2-year 4.6% DPU CAGR through FY20F, backed by full-year contribution of the US data centres in FY19F, ramp-up of 70A Kallang Place in FY19F-20F and BTS data centre in FY20F. There would also be incremental contribution from HP.
Meanwhile, sponsor’s 18 Tai Seng remains an acquisition possibility (stabilise in mid-18); Mapletree Industrial Trust is also looking at more US data centres.

YEO Zhi Bin CIMB Research | LOCK Mun Yee CIMB Research | http://research.itradecimb.com/ 2018-04-25

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