Mapletree Industrial Trust - OCBC Investment 2020-06-24: Proposed Acquisition A Testament Of Quality


Mapletree Industrial Trust - Proposed Acquisition A Testament Of Quality

  • Proposed data centre acquisitions from sponsor.
  • Private placement to raise S$410m.
  • Bump up Mapletree Industrial Trust's fair value to S$3.25.

Proposed acquisition of remaining 60% interest in 14 data centres in the US from sponsor

  • Mapletree Industrial Trust (SGX:ME8U) announced its proposed acquisition of the remaining 60% interest in a portfolio of 14 data centres in the US from its sponsor Mapletree Investments Pte Ltd (MIPL).
  • The 14 properties are currently held by a JV between Mapletree Industrial Trust and MIPL (40% and 60% respective interest) which was set up to acquire the properties in Dec 2017. The agreed portfolio property value of US$823.3m (~S$1,169.1m) on a 100% basis is 0.7% lower than one of the independent valuations but in-line with the other. It also translates into an NPI yield of 6.8%. This is only a tad lower than the initial NPI yield of 6.9% when the portfolio was first acquired in 2017.
  • The total acquisition cost is estimated to be approximately US$218.0m (~S$309.6m), while the existing JV’s debt is US$450m (~S$639.0m).

Strong boost to portfolio mix and growth profile

  • Upon completion of this proposed acquisition, Mapletree Industrial Trust’s AUM will increase from S$5.9b (as at 31 Mar 2020) to S$6.6b.
  • Data centres in Singapore and North America will constitute ~39% of its portfolio by AUM (versus 31.6% previously) and will move Mapletree Industrial Trust further up the industrial value chain, which we view positively. The Hi-Tech Buildings segment will account for ~59.9% of Mapletree Industrial Trust’s AUM after this acquisition.
  • According to industry watcher 451 Research, key drivers of data centre space demand include
    1. a surge in data and cloud computing and need for data storage,
    2. proliferation of consumer devices and
    3. acceleration of cloud adoption pace due to the Covid-19 pandemic.

Finalised private placement exercise to raise gross proceeds of S$410m

OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2020-06-24
SGX Stock Analyst Report BUY UPGRADE HOLD 3.25 UP 2.870