Mapletree Industrial Trust - Maybank Kim Eng 2019-10-23: Another Hi-Tech High

MAPLETREE INDUSTRIAL TRUST (SGX:ME8U)

Mapletree Industrial Trust - Another Hi-Tech High

MAPLETREE INDUSTRIAL TRUST (SGX:ME8U)’s 2Q20 DPU of SGD3.13cts, up 4.0% y-o-y, was in line with MKE and the street at 51% of our full-year, backed by rising hi-tech contributions.
We continue to favour its positive growth fundamentals, as its DPUs are supported by recovering leasing demand and growth visibility from a more resilient portfolio following its hi-tech asset investments and overseas diversification. Its yield has compressed following the strong rally. This, coupled with a stronger balance sheet post a recent SGD400m placement, should support further DPU-accretive deals.

Revenue rose 10.5% y-o-y in 2Q20 while NPI jumped 13.3% y-o-y. Key drivers were new revenue contributions from
1. 18 Tai Seng acquisition completed on 1 Feb 2019,
2. 30A Kallang Place post-redevelopment, and
3. Sunview 1 build-to-suit (BTS) data centre.
Its portfolio occupancy dipped slightly from 90.8% to 90.5, as Singapore occupancies fell from 90.5% to 90.2% with weaker occupancies for its light industrial buildings (down from 97.5% to 91.3%) and stack-up/ramp-up buildings (92.4% to 90.4%), while its US portfolio occupancy was unchanged at 97.4%.
Its hi-tech buildings segment was a bright spot with +2.6% rental reversion, but this was weaker for flatted factories (-2.2%) and business parks (-9.2%).
Management believes Singapore occupancies have bottomed out, and that rental recovery is slow but remains on track.

WALE has increased from 3.4 to 3.6 years with the contribution of the 25- year lease for 7 Tai Seng to Equinix with annual rental escalations.
We estimate this contributes ~5% of FY21 NPI. Its NPI from hi-tech buildings has jumped 39.9% y-o-y to 41% of total NPI contribution in 2Q20, and is expected to rise to 53% by FY22, on our estimates. About 7.2%-22.7% of its leases by gross rental income are due for renewal in FY20-21.

Mapletree Industrial Trust has raised SGD400.0m in new equity to partially fund the second US data centre acquisition, which will complete from late 2019-early 2020. Its low 29.2% gearing (~38% post-deal) should leave an estimated SGD1.0- 1.6b in debt headroom (at 40-45% limits) to support further deals.

Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2019-10-23

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