Mapletree Industrial Trust - CGS-CIMB Research 2020-07-22: Taking A Prudent Stance


Mapletree Industrial Trust - Taking A Prudent Stance

  • Mapletree Industrial Trust’s 1QFY3/21 DPU of 2.87 Scts was slightly below expectations, at 23.5% of our FY21F.
  • The weaker Singapore portfolio performance was offset by higher US contribution.
  • We reiterate our HOLD rating with a higher DDM-based Target Price of S$2.87.

Mapletree Industrial Trust's 1QFY3/21 results highlights

  • Mapletree Industrial Trust (SGX:ME8U) reported a 0.5% y-o-y decline in revenue to S$99.1m in 1QFY3/21 due to impact of rental rebates extended to tenants, offsetting new contributions from 7 Tai Seng, 30A Kallang Place and The Strategy.
  • NPI improved 0.9% y-o-y thanks to lower maintenance and utilities expenses.
  • Income available for distribution income rose 11.6% y-o-y to S$70.6m. However, DPU declined 7.4% y-o-y to 2.87 Scts as the group retained S$7.1m (c.90% payout ratio) in 1Q to mitigate the impact of mandated rental reliefs to tenants.

Slight drag on portfolio occupancy and rents

  • Portfolio occupancy decreased slightly to 91.1% at end-1Q while average portfolio rents slid 1.4% q-o-q as Mapletree Industrial Trust adopted a tenant retention strategy. Mapletree Industrial Trust also shared that rental arrears in Jun 2020 have increased to 1% of the previous 12 months’ revenue.
  • Looking ahead, Mapletree Industrial Trust has 11.3%/16.2% of its gross rental income to be renewed for the rest of FY21F and FY22F. Management indicated that about 55% of its Singapore portfolio is made up of SME tenants and about 90% of its tenants have continued or resumed operations. Mapletree Industrial Trust has rolled out a Covid-19 relief programme of up to S$20m.

Increasing exposure to data centre segment

  • Mapletree Industrial Trust enjoyed new contributions from its 50% stake in 13 data centres in North America in 1Q. It had also announced the purchase of the remaining 60% share in 14 US data centres (DC) from its sponsor at a total purchase consideration of US$218m (S$309.6m), based on an agreed property value of US$494m (S$701.5m).
  • Management expects the transaction to be completed towards end-3QCY20F, and it would further increase Mapletree Industrial Trust’s exposure to the data centre segment to 39% of assets under management. To fund this purchase, Mapletree Industrial Trust recently completed an S$410m private placement. This acquisition should further future-proof Mapletree Industrial Trust’s portfolio for a digital economy, in our view.

Robust balance sheet

  • Mapletree Industrial Trust’s balance sheet remains robust with gearing and interest cover standing at 38.8% and 7.9x at end-1QFY21. Interest cost declined q-o-q to 2.6% and it has S$300m of committed facilities available.

Reiterate HOLD for Mapletree Industrial Trust

LOCK Mun Yee CGS-CIMB Research | EING Kar Mei CFA CGS-CIMB Research | https://www.cgs-cimb.com 2020-07-22
SGX Stock Analyst Report HOLD MAINTAIN HOLD 2.87 UP 2.810