Mapletree Industrial Trust - OCBC Investment 2018-10-24: Still Navigating The Rough Terrain


Mapletree Industrial Trust - Still Navigating The Rough Terrain

  • Mapletree Industrial Trust's 2QFY19 DPU +0.3% y-o-y.
  • Negative rental reversions.
  • Lower Fair Value to S$2.01.

2QFY19 results within our expectations

  • Mapletree Industrial Trust (MIT) reported an in-line set of 2QFY19 results, with gross revenue and NPI declining slightly by 0.4% and 0.1% y-o-y to S$92.2m and S$70.6m, respectively. This can be largely attributed to the pre-termination compensation of S$3.1m received from Johnson & Johnson (J&J) in 2QFY18. Excluding this, gross revenue would have increased by 3.1% y-o-y.
  • Mapletree Industrial Trust’s 2QFY19 DPU rose 0.3% y-o-y to 3.01 S cents, as the S$4.0m distribution declared by its joint venture (40% interest in the data centre joint venture with its sponsor) helped to offset the lower NPI and higher borrowing costs. If we exclude the J&J compensation as mentioned earlier, MIT’s 2QFY19 DPU would have seen an improvement of 6.6% y-o-y, based on our estimates.
  • For 1HFY19, Mapletree Industrial Trust’s NPI was up 0.8% to S$140.0m and this formed 50.0% of our FY19 forecast. DPU of 6.01 S cents represented an uptick of 1.5% and accounted for 49.3% of our full-year projection.

Weaker occupancy and rental reversions

  • Operationally, weakness in occupancy was seen at Mapletree Industrial Trust’s Singapore portfolio, as this came in at 86.2%, versus 87.8% as at end-1QFY19. This was mainly driven by higher vacancies at its Flatted Factories (-1.2 ppt q-o-q to 85.9%) and Hi-Tech Buildings (-4.3 ppt q-o-q to 84.4%). Occupancy for its U.S. portfolio held firm at 97.4%.
  • Rental reversions for renewal leases in Singapore came in negative for all its business segments in 2QFY19: -3.2% for Flatted Factories, -4.3% for Hi-Tech Buildings, -3.7% for Business Park Buildings and -4.1% for Stack-Up/Ramp-Up Buildings. There were no renewal leases for its Light Industrial Buildings.

Moderating our forecasts

  • Looking ahead, Mapletree Industrial Trust’s Mapletree Sunview 1 data centre project will have a full-quarter of contribution from 3QFY19, while its 30A Kallang Place has increased its committed occupancy to 75.0% (1QFY19: ~43.8%), with most leases to commence by 4QFY19.
  • Notwithstanding this, we see the need to moderate our occupancy projections from FY20F amid the current macroeconomic uncertainties. We also raise our finance costs assumption.
  • Our FY19 DPU forecast remains intact but our FY20 forecast is lowered by 3.5%. Our DDM-derived fair value estimate drops from S$2.08 to S$2.01.

Wong Teck Ching Andy CFA OCBC Investment Research | 2018-10-24
SGX Stock Analyst Report HOLD MAINTAIN HOLD 2.01 DOWN 2.080