Mapletree Industrial Trust (MINT SP) - Maybank Kim Eng 2018-04-25: Hi-tech High

Mapletree Industrial Trust (MINT SP) - Maybank Kim Eng 2018-04-25: Hi-tech High MAPLETREE INDUSTRIAL TRUST ME8U.SI

Mapletree Industrial Trust (MINT SP) - Hi-tech High


In line results, BUY

  • We raise DPU forecasts for Mapletree Industrial Trust (MINT) by 0-1% following its 4Q/FY18. Results were in line, driven by higher hi-tech contribution, at 27.8% of NPI and 37.7% of its AUM at end-Mar 2018. 
  • With growth visibility from its completed Kallang AEI and full-year accretion from the Dec 2017 US data centre investment, we expect MINT to deliver 5.9% 3-year DPU CAGR, the strongest amongst its peers. 
  • Upside will be underpinned by its strong balance sheet, with SGD0.7-1.1b in debt headroom. Our new DDM-based Target Price is SGD2.25 (WACC: 7.2%, LTG: 1.5%) and we reiterate BUY.



Steady quarter

  • Mapletree Industrial Trust (MINT)’s 4Q18 revenue and NPI both rose 2.9% y-o-y, driven by contribution from the HP build-to-suit (BTS) and its 40% interest in the portfolio of 14 US data centres acquired in Dec 2017. FY18 DPU of SGD11.75cts, up 3.2% y-o-y, met ours and consensus estimates. 
  • Singapore occupancies excluding hi-tech and business park buildings were stable or improved q-o-q. The AEI at 30A Kallang Place that completed in Feb 2018 with 40.2% of its NLA pre-committed caused the dip in hi-tech occupancy, and should improve in coming quarters. According to management, the signing rents (with technology sector tenants) average SGD3.50-3.80 psfpm versus the sub- SGD2.00 psf pm achieved at other older flatted factory buildings in the Kallang Basin cluster. 
  • Meanwhile, MINT has backfilled about 23% of the business park space vacated by Johnson & Johnson. 
  • Most segments except for hi-tech saw negative reversions (from -0.8% to -3.8%) during the quarter, as rents lag improving manufacturing GDP growth.


Sound balance sheet underscores growth optionality

  • Mapletree Industrial Trust (MINT) continues to stand tall on key balance-sheet metrics, with its low 2.9% funding cost and 33.1% aggregate leverage, versus the 36.7% industrial REIT sector average. Hedged borrowing ratio has risen to 85.1% from 60.7%, with weighted average debt maturity extended to 3.3 years (from 3.0 years). MINT has fully hedged its US JV investment with matched USD borrowings and 99% of its FY18 income stream. 
  • We estimate SGD0.7-1.1b in debt headroom to support potential inorganic growth opportunities.


Swing Factors 


Upside 

  • Earlier-than-expected pick-up in leasing demand driving improvement in occupancy. 
  • Better-than-anticipated rental reversion trend. 
  • Accretive acquisitions. 

Downside 

  • Prolonged slowdown in economic activity could reduce demand for industrial space, resulting in lower occupancy and rental rates. 
  • Termination of long-term leases contributing to weaker portfolio tenant retention rate. 
  • Sharper-than-expected rise in interest rates could increase cost of debt and negatively impact earnings, with higher cost of capital lowering valuations.







Chua Su Tye Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2018-04-25
SGX Stock Analyst Report BUY Maintain BUY 2.25 Up 2.200



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