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

MAPLETREE INDUSTRIAL TRUST (SGX:ME8U)

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.

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

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.

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.

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.

We cut our FY21-22F DPU by 2.4-8.6% after assuming a 1-3% pt reduction in occupancy and bake in a 1-3% decline in spot rents over the next two years. We have also assumed a dividend payout ratio of 98% in FY3/21F and 100% thereafter. Our DDM-based Target Price is unchanged at S$2.66.
Mapletree Industrial Trust's share price has fallen 19% from its recent high and offers a potential total return of 14%. Hence, we upgrade our rating to ADD from Hold.
See Mapletree Industrial Trust Share Price; Mapletree Industrial Trust Target Price; Mapletree Industrial Trust Analyst Reports; Mapletree Industrial Trust Dividend History; Mapletree Industrial Trust Announcements; Mapletree Industrial Trust Latest News.
We continue to like Mapletree Industrial Trust for its good execution track record with visible earnings growth from ongoing development activities and exposure to the US data centre sector.
Re-rating catalyst: faster-than-expected Singapore market recovery.
Downside risk: protracted recovery leading to longer and larger than projected vacancies.

LOCK Mun Yee CGS-CIMB Research | EING Kar Mei CFA CGS-CIMB Research | https://www.cgs-cimb.com 2020-04-28

SGX Stock Analyst Report ADD UPGRADE HOLD 2.660 SAME 2.660