Mapletree Industrial Trust - Maybank Kim Eng 2020-07-22: Growing Faster On Data

MAPLETREE INDUSTRIAL TRUST (SGX:ME8U)

Mapletree Industrial Trust - Growing Faster On Data

Mapletree Industrial Trust (SGX:ME8U)’s 1Q21 DPU was down 7.4% y-o-y as a further SGD7.1m in tax-exempt income from its JVs was withheld (after the SGD6.6m in 4Q20). See Mapletree Industrial Trust Announcements.
We see additional rental relief in 2Q21 given mandated relief from the COVID-19 (temporary measures) Act, which management expects could result in a SGD20.0m total tenant assistance package. Our forecasts are further adjusted for new units from its recent SGD410.0m EFR and the remaining 60% interest in its US data centre deal, which lifts our FY22-23 DPUs by 3-4%.

We continue to favour Mapletree Industrial Trust’s positive growth fundamentals and its more resilient portfolio - DPU visibility has been strengthened by its rising hi-tech asset investments and overseas diversification.
Our DDM-based Target Price rises to SGD3.30 (COE: 5.9%, LTG: 2.0%). BUY.

Mapletree Industrial Trust's 1Q21 revenue fell 0.5% y-o-y while NPI rose 0.9% y-o-y, as higher contributions from 7 Tai Seng Drive, The Strategy and 30A Kallang Place, were offset by rental rebates extended to its tenants. Portfolio occupancy fell marginally from 91.5% to 91.1%, with weaker occupancies across all segments except for its data centres, which were stable at 99.2%.
Management has pushed hard on tenant retention, which increased to 81.2% from 77.5% in 4Q20, even as its gross rents in S’pore fell 1.0% y-o-y and 1.4% q-o-q to SGD2.08 psfpm. All segments except for data centres and light industrial buildings, saw lower rents with its rental rebates.

Mapletree Industrial Trust has reclassified its data centres as a standalone property segment. This has increased to 31.6% of its AUM, and is expected to rise with the acquisition of a 60% interest in its first US data centre asset portfolio.
The assets are well-placed and should help deepen its market penetration, underpinned by strong demand growth, with outsourced operational needs (in m sf) set to rise at a 9.5% CAGR from 2018-24E with a 14.0% CAGR rise in cloud computing revenues (according to 451 Research).

Mapletree Industrial Trust's leverage rose to 38.8% (from 37.6%), with WADM at 3.9 years, interest cover at 7.9x, and its funding cost lower at 2.6% (from 2.9%). A recently-completed SGD410.0m private placement exercise has strengthened its balance sheet, while liquidity has improved further following its inclusion into the benchmark FSSTI on 22 Jun.
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.

Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2020-07-22

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