Mapletree Industrial Trust - OCBC Investment 2019-04-23: Strong Balance Sheet & Primed For Growth

MAPLETREE INDUSTRIAL TRUST (SGX:ME8U)

Mapletree Industrial Trust - Strong Balance Sheet & Primed For Growth

MAPLETREE INDUSTRIAL TRUST (SGX:ME8U) reported its 4QFY19 results which met our expectations. Gross revenue and NPI grew 9.3% and 11.7% y-o-y to S$98.8m and S$75.9m, respectively. This was driven largely by inorganic growth and AEIs, but partially offset by lower occupancy in its Flatted Factories and Stack-up/Ramp-up Buildings segments.
4Q19 DPU rose 4.4% y-o-y to 3.08 S cents.
For FY19, Mapletree Industrial Trust’s NPI increased by 3.7% to S$287.8m, while DPU of 12.16 S cents represented growth of 3.5% and made up 101.0% of our full-year forecast.

Operationally, Mapletree Industrial Trust’s portfolio occupancy improved 2 ppt q-o-q to 90.2% (Singapore: +2.1 ppt to 89.8%; US: unchanged at 97.4%). The increase in Singapore was broad-based, with the exception of Business Park Buildings (-2.1 ppt). This was due to some right-sizing by one of its top ten tenants and some non-renewals.
On the other hand, Hi-Tech Buildings saw an occupancy boost of 4.5 ppt, as the physical occupancy of 30A Kallang Place was bumped up from 38.6% to 85.6% (committed occupancy at 92.9%). However, rental reversions remained soft for renewal leases. This came in at -3.4% for Flatted Factories and -4.8% for Business Park Buildings, but was flat for Hi-Tech Buildings.
Only Stack-up/Ramp-up Buildings showed positive rental uplift, at +0.9%.

In terms of portfolio valuation, Mapletree Industrial Trust registered a portfolio revaluation gain of S$30.8m in Singapore and S$9.4m in the US (booked under share of JV). Including the acquisitions of 18 Tai Seng and 7 Tai Seng Drive, overall portfolio valuation rose 10.4% to S$4,771m, although this was partially offset by lower valuation for a number of its Flatted Factories properties which now have their remaining underlying land tenures below 20 years.
Financially, Mapletree Industrial Trust’s aggregate leverage was healthy at 33.8% following a private placement exercise in Feb. This leaves sufficient debt headroom for future acquisitions.
After rolling forward our valuations and factoring in a lower risk free rate assumption of 2.3% (previously 2.7%), we bump up our fair value estimate from S$1.98 to S$2.06.

Wong Teck Ching Andy CFA OCBC Investment Research | https://www.iocbc.com/ 2019-04-23

SGX Stock Analyst Report HOLD MAINTAIN HOLD 2.06 UP 1.980