Mapletree Industrial Trust - Maybank Kim Eng 2020-10-28: Adding Resiliency

MAPLETREE INDUSTRIAL TRUST (SGX:ME8U)

Mapletree Industrial Trust - Adding Resiliency

Mapletree Industrial Trust (SGX:ME8U)’s 2Q21 DPU, down 1.0% y-o-y, rose 8.0% q-o-q with its (overseas) tax-exempt income fully-distributed on the back of a more stable outlook.
While Singapore occupancy improved, reversion was at -3.3% y-o-y, with rent recovery likely only from 2H 2021. We see rental relief rising further in 2H21 to support its SME tenancies, provided for by its SGD20.0m tenant assistance package.

The results were in line (with consensus and MKE); we maintain our forecasts and DDM-based target price (COE: 5.6%, LTG: 2.0%).
We continue to favour Mapletree Industrial Trust's positive growth fundamentals and more resilient portfolio, with DPU visibility strengthened by its rising hi-tech asset investments and overseas diversification. BUY.

Revenue rose 1.5% y-o-y and 4.3% q-o-q while NPI increased by 2.0% y-o-y and 3.8% q-o-q with the consolidation of its 14 US data centres (previously 40% equity accounted), which were partly offset by rental relief and income loss from redevelopment of the Koyam Ayer 2 (KA2) Cluster.
Mapletree Industrial Trust's portfolio occupancy improved from 91.1% to 92.3%; they rose or were stable at all segments except for data centres (99.2% to 98.7%) and stack-up/ramp-up buildings (93.7% to 93.5%). Excluding KA2, flatted factories occupancy was lower (88.8% to 88.4%) with demand weak for multi-tenanted space.

Gross rents fell 2.4% q-o-q to SGD2.03 psfpm (vs -1.4% q-o-q in 1Q21) as all segments except for its data centres recorded lower rents on the back of rental rebates.
Mapletree Industrial Trust's flatted factories saw a -2.3% rental reversion, and management expects negative reversions (at -5.0%) to persist till at least 2H 2021 given the high 54% of Singapore SME tenancies, which remain pressured by Covid headwinds. SGD7.1m in rental relief has been extended, with SGD12.9m expected to be recognised in 2H21.

Mapletree Industrial Trust's portfolio has been strengthened by its hi-tech and data centre deals. The latter’s contribution should rise further from 38.5% to 41.0% of AUM with the acquisition of its 28th US asset in Virginia for USD200.6-262.1m. Post-deal in 1Q20, the new tenant adds 2.7% to its gross rental income as the fifth largest.
Mapletree Industrial Trust's balance sheet remains strong at 38.1% leverage (from 38.8%), with SGD1.4-2.2b in debt headroom to fund further deals.
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/ 2020-10-28

SGX Stock Analyst Report BUY MAINTAIN BUY 3.400 SAME 3.400