Mapletree Industrial Trust - Maybank Kim Eng 2019-07-10: Another Growth Phase


Mapletree Industrial Trust - Another Growth Phase

Announces redevelopment of Kolam Ayer cluster

  • Mapletree Industrial Trust (SGX:ME8U)’s high-tech growth momentum in Singapore has gained pace with its largest redevelopment project to-date at an estimated development cost of SGD263.0m, to reposition its Kolam Ayer 2 cluster into a high-tech industrial precinct.
  • We forecast a 2.5% rise in DPUs from FY23, backed by the 71% GFA boost and a stronger 80+% rental uplift from existing flatted factories into high-tech industrial assets.
  • Mapletree Industrial Trust’s shares have re-rated strongly following overseas portfolio diversification efforts and remain well-supported by a more resilient AUM profile and potential acquisition growth catalysts. We have adjusted estimates on lower funding cost assumptions and await further project details.
  • Our new DDM-based Target Price is SGD2.40 (COE: 6.7%, LTG: 1.5%). BUY.

High-tech contribution rises further

  • The proposed includes a for a – a German-based global device that has to lease 244% the enlarged 865,600 GFA as new APAC upon in 2H. The initial lease is for years with 20% annual escalations, in with its BTS projects (for HP, Equinix) a renewal for two additional terms.
  • Management for an estimated for the project. We that property’s could rise from 18% of gross in FY19 to 45% upon, with the lift in and rents. This will turn support of its high-tech from 340% to 380% of its by 2023.

Strong build-to-suit track record mitigates execution risks

  • Its high-tech growth momentum has gained momentum following strong leasing activity at nearby 30A Kallang Place, now fully-pre-committed. We believe project risks lie mostly on execution but these are mitigated by its strengthening BTS track record, as its AEI/redevelopment projects have totalled more than SGD700m in value to-date.
  • Demand recovery remains intact against a likely sector cycle bottoming into 2H 2019.

Redevelopment project details

  • The Kolam Ayer 2 cluster at 155, 155A and 161 Kallang Way currently comprises two seven-storey flatted factories and an amenity centre, with GFA of ~506,720 sf. The cluster is sited on a land of ~346,270 sf and zoned for Business 2 use with its land lease tenure of 43 years commencing from 1 Jul 2008.
  • It is located within the Kolam Ayer industrial estate, close to the MacPherson neighbourhood and a 10-15 min drive to the CBD. It is well-served by three major expressways and commands a prominent frontage along the PIE. It is also within walking distance from the Geylang Bahru MRT station on the Downtown Line.
  • The site’s utilised plot ratio is set to increase from 1.5 to 2.5 with its redevelopment into a high-tech industrial precinct, while its total GFA is expected to rise from 506,720 sf currently to ~865,600 sf upon completion.
  • Within the project site, a seven-storey building with GFA of ~211,000 sf is expected to be developed as a BTS facility for an anchor tenant, to account for 24.4% of the enlarged GFA.
  • Mapletree Industrial Trust is targeting high value-add and knowledge-based businesses from the advanced manufacturing and ICT sectors for the remaining leases. Construction works, estimated at SGD263m in total, are expected to commence in 2H 2020 till 2H 2022 and will be debt-funded.

Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2019-07-10
SGX Stock Analyst Report BUY MAINTAIN BUY 2.40 UP 2.250