Mapletree Industrial Trust - OCBC Investment 2019-01-23: Strong DPU Growth But Negative Reversions

MAPLETREE INDUSTRIAL TRUST (SGX:ME8U)

Mapletree Industrial Trust - Strong DPU Growth But Negative Reversions

MAPLETREE INDUSTRIAL TRUST (SGX:ME8U) reported its 3QFY19 results which met our expectations. Gross revenue grew 2.3% y-o-y to S$93.6m, while NPI increased at a smaller magnitude of 1.4% to S$71.9m due to higher marketing commission and property taxes.
DPU jumped 6.6% y-o-y to 3.07 S cents and this was underpinned by a S$4.2m distribution declared by its joint venture (40% interest in the data centre joint venture with its sponsor), which was not present in 3QFY18.
For 9MFY19, Mapletree Industrial Trust’s gross revenue and NPI improved 1.6% and 1.0% to S$277.3m and S$211.9m, respectively, with the latter forming 75.6% of our FY19 forecast. DPU of 9.08 S cents represented growth of 3.2%, and this constituted 74.5% of our full-year projection.

One of the sore points for the quarter came from the negative rental reversions for renewal leases for all its business segments in Singapore. It was the second consecutive quarter for this occurrence. The rental reversions were -1.5% for Flatted Factories, -3.0% for Hi-Tech Buildings, -6.4% for Business Park Buildings and -3.6% for Stack-Up/Ramp-Up Buildings. There were no renewal leases for its Light Industrial Buildings.
Overall gross rental rate in its Singapore portfolio fell marginally by 0.5% q-o-q to S$2.04 psf/month for 3QFY19. However, there was a slight increase in occupancy for its Singapore properties by 1.5 ppt q-o-q to 87.7%, such that overall portfolio occupancy went up from 86.7% to 88.2% (U.S. portfolio occupancy unchanged at 97.4%). This was driven largely by the continued ramp-up at 30A Kallang Place, which has now secured pre-commitment of 89.0% (2QFY19: 75.0%).

In terms of financial position, Mapletree Industrial Trust maintained a strong balance sheet. Its aggregate leverage ratio came down slightly by 0.4 ppt q-o-q to 34.7%, thanks in part to its distribution reinvestment plan (DRP). 75.3% of its borrowings are fixed/hedged versus 78.3% in the preceding quarter.
In terms of FX risk management, Mapletree Industrial Trust has hedged ~88% of its net USD income streams into SGD.
Our fair value estimate of S$2.04 is kept unchanged.

Wong Teck Ching Andy CFA OCBC Investment Research | https://www.iocbc.com/ 2019-01-23

SGX Stock Analyst Report HOLD MAINTAIN HOLD 2.040 SAME 2.040