Mapletree Industrial Trust - DBS Research 2019-04-23: Well-Timed Acquisitions Drive Earnings To New Record


Mapletree Industrial Trust - Well-Timed Acquisitions Drive Earnings To New Record

  • Mapletree Industrial Trust's 4QFY19 DPU of 3.08Scts in line with expectations.
  • Occupancy rates improving on the back of Manager’s defensive strategy.
  • Development of data-center at 7 Tai Seng to drive earnings in the medium term.
  • Comfortable gearing level to undertake acquisitions.

What’s New

Mapletree Industrial Trust (MINT): 4QFY19 earnings hit another record; benefiting from well-timed acquisitions.

  • In a series of well-timed acquisitions and development completions, MAPLETREE INDUSTRIAL TRUST (SGX:ME8U) delivered another record quarterly DPU of 3.08 Scts in 4QFY19, which was against all odds given competition from supply. Topline and net property income grew by 9.3% and 11.7% to S$98.8m and S$75.9m respectively.
  • Main contributors to the stronger performance came from
    1. new contribution from 18 Tai Seng, acquired during the quarter,
    2. stronger physical occupancy at 30A Kallang Place (c.86% in 4Q18),
    3. completion of Mapletree Sunview 1.
    These more than offset the lower occupancies at the flatted factories and stack-up/ramp-up properties.
  • On a full year basis, revenues and net property income grew by 3.5% and 3.7% respectively, to S$376.1m and S$287.8m.
  • Interest costs in 4QFY19 increased by 12% y-o-y on the back of an expanded portfolio while interest rate was stable at 3.0% (vs 2.9% in 4QFY18).
  • Net profit from associates increased 17.9% y-o-y to S$3.7m but fair value gains increased at a more moderate pace in 4QFY19.
  • As a result, distributable income grew by 8.0% y-o-y to S$59.9m; DPU increased by a smaller 4.4% due to an enlarged share base.

Operational metrics: Occupancy rates holding up.

  • Portfolio occupancy rates increased to 90.2% (Singapore: 89.8% in 4QFY19; 87.7% in 3QFY19) while occupancy rates in the US remained stable at 97.4%. The improved occupancy rates came from Hi-Tech Buildings as the physical occupancy rates for 30A Kallang Place increased significantly to c.86% vs c.39% a quarter ago. Committed occupancy rates continued to improve, reaching c.93%.
  • Occupancy at its business parks dipped q-o-q from 81.5% to 79.4%, mainly due to a return of space at The Strategy but we understand that Mapletree Industrial Trust has completed its rationalisation exercise at the property.
  • Occupancy rates improved marginally at the Flatted Factories (87.9% in 4QFY19; 86.4% in 3QFY19) and Stack-Up/Ramp-Up buildings (91.6% in 4QFY19; 88.9% in 3QFY19).

Rental reversions were mixed.

  • Reversions remained mixed as expected, with most industrial sub-segments recording flattish or slight negative rental reversions in the quarter, but reversion at Stack-Up/Ramp-Up buildings was slightly higher.

Balance sheet metrics strong; more headroom for acquisitions.

  • The Singapore portfolio recorded a net fair value gain of S$30.8m. The overall value of the portfolio increased by S$428m due to inclusion of 18 Tai Seng and capitalised cost from the ongoing construction of 7 Tai Seng. NAV increased marginally to S$1.51 as a result.
  • Gearing increased slightly to c.33% but is still within Manager’s comfortable level, and provides the REIT with financial flexibility to undertake more acquisitions.
  • The Manager announced that the dividend reinvestment plan is in place for 4QFY19, but will be discontinued thereafter.

Derek TAN DBS Group Research | Mervin SONG CFA DBS Research | Carmen Tay DBS Research | 2019-04-23
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