Mapletree Industrial Trust - UOB Kay Hian 2018-04-24: 4QFY18 Results Of MINT In-line

Mapletree Industrial Trust - UOB Kay Hian 2018-04-24: 4QFY18 Results Of MINT (in-line) MAPLETREE INDUSTRIAL TRUST ME8U.SI

Mapletree Industrial Trust - 4QFY18 Results Of MINT (in-line)

  • Mapletree Industrial Trust (MINT)’s Singapore portfolio rents were pulled up by hi-tech building renewals. Management continues to see positive growth momentum for its Singapore portfolio and favourable demand-supply dynamics in the US.
  • Maintain HOLD. Target price: S$2.00.
  • Maintain OVERWEIGHT on the sector.



ACTION


Results in line with expectations; maintain HOLD with an unchanged target price of S$2.00, based on DDM (required rate of return: 6.6%, terminal growth: 2.0%).

  • Mapletree Industrial Trust (MINT) reported a 4QFY18 DPU of 2.95 S cents, up 2.4% y-o-y. Both gross revenue and NPI grew 2.9%, due to revenue contribution from the build-to-suit project for HP Singapore (Pte) Ltd, but this was partially offset by lower portfolio occupancies across all property segments except for Light Industrial Buildings. 
  • Results were consistent with our expectation, with FY18 DPU representing 98.2% of our full-year estimate. Entry price: S$1.70.
  • Portfolio review. Overall occupancy decreased marginally to 90.0% in 4QFY18, due to lower occupancy in the Singapore portfolio (89.6%), dragged mainly by Hi-Tech Buildings. Meanwhile, the US portfolio occupancy remained stable at 97.4% in 4QFY18.
  • Average lease expiry of 3.8 years by rental income. The Singapore portfolio had a WALE of 3.6 years, while the US Portfolio had a WALE of 6.0 years.
  • 4QFY17 Singapore portfolio rent up 4.1% q-o-q to S$2.01 psf, pulled up by renewals of leases in Hi-Tech Buildings at higher rents. The US portfolio achieved an average passing rental of US$2.01.
  • 4Q17 portfolio valuation grew 15.3% yoy to S$4.3b, due mainly to the inclusion of the US portfolio (S$413.1m). The Singapore portfolio (excl. the divestment of 65 Tech Park Crescent in Jul 2017) saw revaluation gain of S$65.5m and capitalised cost of S$111.8m from improvement works.
  • Promising outlook for both Singapore and US portfolios. Management alluded that sentiments in the wider economy and of SMEs in Singapore are improving, with the Singapore economy growing 4.3% y-o-y in 1Q18 (vs 3.6% y-o-y in 4Q17) and the manufacturing sector growing 10.1% y-o-y in 1Q18 (vs 4.8% y-o-y in 4Q17). While MINT’s multi-user factory space declined 2.2% q-o-q to S$1.76 psf pm, business park space grew 5.1% q-o-q to S$4.30 psf pm. However, growth momentum continues to be at risk from threats to free trade, geopolitical tensions, and the impending large supply of competing industrial space (which will exert pressure on both occupancies and rental rates).
  • The US portfolio continues to enjoy favourable demand-supply dynamics. According to 451 Research, supply for multi-tenant data centres in the US (in net operational sf) will grow by 8.8% (vs demand growth of 13.4% in 2018). The demand for edge data centres is rising to meet the needs for data to be stored close to its end–users (due to latency requirements), and more broadly due to the growth of data and content, mobile services, and adoption of cloud services etc.





Vikrant Pandey UOB Kay Hian | Loke Peihao UOB Kay Hian | http://research.uobkayhian.com/ 2018-04-24
SGX Stock Analyst Report HOLD Maintain HOLD 2.000 Same 2.000



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