Mapletree Industrial Trust - UOB Kay Hian 2019-01-24: 3QFY19 In Line


Mapletree Industrial Trust - 3QFY19 In Line

Results in line with our expectations.

  • MAPLETREE INDUSTRIAL TRUST (SGX:ME8U)'s 9MFY19 DPU accounts for 72.1% of our full-year forecast. 3QFY19 DPU grew 6.6% y-o-y to 3.07 S cents.
  • Goss revenue and NPI increased 2.3% and 1.4% y-o-y respectively, driven by full-quarter contribution from Phase One of the build-to-suit project for HP Singapore after expiry of the rent-free period, as well as contributions from newly completed Mapletree Sunview 1 and 30A Kallang Place post-asset enhancement.
  • Occupancy for Singapore portfolio improved 1.5ppt q-o-q to 87.7%, driven by the high-tech buildings (+5.8ppt q-o-q) and business park buildings (+1.9ppt q-o-q).

3QFY19 rental reversions.

  • Flatted factories (-1.5%), business parks (-6.4%), hi-tech buildings (-3.0%), stack-up/rack-up buildings (-3.6%) saw negative reversions in 3QFY19. Mapletree Industrial Trust has placed priority on improving occupancies and retaining tenants.
  • Nevertheless, Singapore portfolio saw average passing rents improved marginally by 1% q-o-q to S$2.04psf pm.
  • For the US portfolio, passing rents increased 1.5% q-o-q to US$2.04psf pm.

Average lease expiry of 3.7 years.

  • The Singapore portfolio has a WALE of 3.6 years, while the US portfolio has a WALE of 5.3 years.
  • The US portfolio accounts for 9.7% of the total portfolio value.

Gearing eased marginally to 34.7% (2QFY19: 35.1%).

  • We estimate a potential debt headroom of S$465m (assuming maximum gearing of 45%). Mapletree Industrial Trust has 75.3% of its total debt in fixed rates (2QFY19: 78.3%). Interest coverage ratio was healthy at 6.5x.

Cautious outlook due to external uncertainties.

  • Management noted that business sentiment among local companies has moderated due to trade tension, which could result in a slower pace of expansion for the global economy. Upcoming supply of competing industrial space could also moderate rents and occupancies. However, Mapletree Industrial Trust’s strategy of growing Hi-Tech Buildings segment has yielded positive results.
  • Growth in 3QFY19 was aided by development projects in Singapore and acquisition of 40% stake in 14 data centres located in the US. Growth in the wholesale data centre market is expected to be driven by demand from hyperscale cloud providers.

Collaborating with Equinix, a global data centre company.

  • Mapletree Industrial Trust is supporting Equinix as it expands its presence in Singapore. It will upgrade the 7-storey high-tech building at 7 Tai Seng Drive into a data centre with a gross floor area of about 256,600sf by increasing power capacity and floor loading capacity, and adding telecommunication infrastructure.
  • The new facility - International Business Exchange (IBX) data centre-SG4 - will be Equinix’s fourth data centre in Singapore. Equinix is also a tenant at Mapletree Industrial Trust’s properties at 26A Ayer Rajah Crescent, Singapore and 180 Peachtree, Atlanta.

Maintain HOLD

  • Maintain HOLD and target price of S$1.96, based on DDM (required return: 6.8% and terminal growth of 2.0%). Entry price is S$1.94.

Jonathan KOH UOB Kay Hian Research | Peihao LOKE UOB Kay Hian | 2019-01-24
SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.96 UP 1.940