Mapletree Industrial Trust - CGS-CIMB Research 2020-04-28: Buffer From Overseas Assets


Mapletree Industrial Trust - Buffer From Overseas Assets

  • Mapletree Industrial Trust (SGX:ME8U)'s 4Q/FY20 DPU of 2.85/12.24 Scts, in line, at 26/99% of our FY20F forecast.
  • The weaker outlook for Singapore in FY3/21F will be partly offset by a full-year’s income from data centres in US and Canada, in our view.
  • Upgrade to ADD from Hold with unchanged DDM-based Target Price of S$2.66.

4QFY3/20 results highlights

  • Mapletree Industrial Trust reported a 3%/3.2% y-o-y rise in 4Q revenue/NPI with contributions from 18 Tai Seng, 30A Kallang Place and 7 Tai Seng, partly offset by lower revenue from Kolam Ayer 2 Cluster redevelopment. See Mapletree Industrial Trust Announcements.
  • Distributable income grew 15.4% y-o-y to S$69.2m; however, DPU declined 7.5% y-o-y to 2.85 Scts as the group retained S$6.6m (90.5% payout ratio) in 4Q. FY3/20 DPU of 12.24 Scts was slightly higher y-o-y (97.5% payout ratio). Excluding the income retained, 4Q and FY3/20 DPU would have risen by 2.3%/3.1% y-o-y.
  • Mapletree Industrial Trust revalued its portfolio, increasing BV to S$1.62/unit

High portfolio occupancy, weaker outlook for Singapore portfolio

  • Portfolio occupancy improved to 91.5% at end-4Q with an uptick in Singapore properties and higher US occupancy. Rental reversion was stable in 4Q.
  • Looking ahead, Mapletree Industrial Trust has 17.7%/17% of its gross rental income to be renewed in FY21F/22F. Management said about 55% of its Singapore portfolio is made up of SME tenants and about half its tenants stayed open during the Circuit Breaker period.
  • That said, it has rolled out a Covid-19 relief programme of up to S$13.7m. Flatted factories accounted for c.37% of Mapletree Industrial Trust’s FY3/20 NPI. Accordingly, we have assumed 1-2 months’ of rental rebates within the flatted factories portfolio and factor in a 1-3% pt increase in vacancies over FY21-22F.

US data centre contributions to partly buffer Singapore weakness

  • Nonetheless, a full-year’s contribution from the newly-acquired data centres in US and Canada should partly offset some of the expected weaker Singapore performance, in our view.
  • Mapletree Industrial Trust purchased an attributable 50% stake in 3 fully fitted hyperscale and 10 powered shell data centres in US and Canada, for US$695.4m. We estimate these assets could add c.S$29m of net profit to MINT’s FY21F bottomline. We estimate total overseas contributions to make up c.16% of Mapletree Industrial Trust’s FY21F distribution income.

Strong balance sheet

  • Mapletree Industrial Trust’s gearing/interest cover were 37.6%/7.7x at end-4QFY20. It has completed its debt refinancing for FY21F and has S$380m of committed facilities available.

Upgrade to ADD from Hold

LOCK Mun Yee CGS-CIMB Research | EING Kar Mei CFA CGS-CIMB Research | 2020-04-28
SGX Stock Analyst Report ADD UPGRADE HOLD 2.660 SAME 2.660