Mapletree Industrial Trust - Maybank Kim Eng 2020-01-22: SG Recovery Underway


Mapletree Industrial Trust - SG Recovery Underway

Still our top industrial sector pick, BUY

  • MAPLETREE INDUSTRIAL TRUST (SGX:ME8U)’s 3Q20 DPU of SGD3.16cts, up 2.9% y-o-y, was ahead of ours and consensus estimates with 9M20 DPU at 77% of our full-year, backed by rising hi-tech contributions. See Mapletree Industrial Trust Dividend History.
  • We continue to like its positive growth fundamentals, with its DPUs supported by recovering leasing demand in Singapore and growth visibility from a more resilient portfolio following its hi-tech asset investments and overseas diversification. This, together with a stronger balance sheet post a recent SGD400m placement, should support further DPU-accretive deals.
  • Mapletree Industrial Trust’s valuation has been driven by strong execution and growth momentum on expanding its hi-tech mix (now at 49.3% of AUM), and we see upside from its sponsored US data centre assets in the near-term.
  • We raised FY20-21 DPUs by 2%, while our DDM-based Target Price rises (COE: 6.4%, LTG: 1.5%, see Mapletree Industrial Trust Target Price). BUY.

SG occupancies up, led by hi-tech, business parks

  • Mapletree Industrial Trust's revenue rose 9.7% y-o-y in 3Q20 while NPI jumped 14.0% y-o-y. Key drivers were new contributions from
    1. 18 Tai Seng from Feb 2019,
    2. 7 Tai Seng Drive on a 25-year lease to Equinix, and
    3. better performance at 30A Kallang Place post-redevelopment.
  • Its portfolio occupancy improved from 90.5% to 90.7% as Singapore occupancies increased from 90.2% to 90.5% due to its high-tech buildings (96.9% to 98.4%) and business park buildings (81.9% to 85.1%). Mapletree Industrial Trust's US portfolio occupancy rose from 97.4% to 97.8% with the contribution of its US turnkey portfolio (100% occupied).
  • See Mapletree Industrial Trust Announcements.

Rents have likely bottomed out in SG

  • Rental reversions were positive for its hi-tech buildings (+1.4% y-o-y), business park buildings (+0.2%), and stack-up/ramp-up (+1.6%), but this was weaker for flatted factories (-1.1%).
  • WALE increased from 3.6 to 3.9 years with the addition of the US turnkey portfolio at 7.8 years as of end-Dec 2019. 62 of its 108 existing tenants at Kolam Ayer 2 Cluster (to be redeveloped into a new high-tech industrial precinct from 2H 2020) have committed to leases at its other properties.

Chua Su Tye Maybank Kim Eng Research | 2020-01-22
SGX Stock Analyst Report BUY MAINTAIN BUY 2.95 UP 2.700