Mapletree Industrial Trust - DBS Research 2020-10-29: Fuel For The Digital World


Mapletree Industrial Trust - Fuel For The Digital World

Pivot into an emerging datacenter play

Light at the end of tunnel as recovering distribution trend a positive.

  • Mapletree Industrial Trust (SGX:ME8U) reverted back to full pay-out in 2QFY21, on the back of stabilising COVID-19 trend in Singapore, which we read positively.
  • On a y-o-y basis, Mapletree Industrial Trust reported revenues and net property income of S$103.4m and S$81.6m, representing a 1.5% and 2.0% rise respectively. The growth in revenues mainly came from the contribution from the 60% stake of its 14 USA data-centers, which more than offset the rental rebates and negative rental reversions seen across its Singapore portfolio. Distributions rose by 14.8% on increased JV contributions to S$72.9m. DPU dipped by 1.0% largely due to enlarged units in issue.
  • On a q-o-q basis, there was good momentum as revenues and net property income rose by 4.3% and 3.8%, mainly from contribution from acquisitions. DPUs was higher by 8.0% q-o-q due to the manager reverting to a 100% payout ratio this quarter.

Planned rental reliefs within expectations.

  • Management sees improved operating visibility for its tenants. Total rental reliefs extended amounted to S$7.1m as of 1HFY21. The manager maintains its estimates of c.S$20m of overall rental reliefs (either mandatory or planned) may be extended in FY21, which in our estimates, most of which will likely be extended in 3QFY21.
  • Retained sums of S$13.7m will be paid out in stages and will likely help keep DPU stable in 2H21. Rental arrears remain manageable with collections high at over 98%.

Low gearing with solid financials.

  • Gearing dipped marginally to 38.1% vs 38.8% a quarter ago with overall metrics remaining stable (Fixed rates up to c.93.8%%, debt cost stable at 2.7% (vs 2.6% a quarter ago). Interest cover remain robust at 7.3x. Mapletree Industrial Trust has no debt up for renewal in FY21F, with a stable expiry profile in the coming years.

Operating metrics remain resilient.

  • Portfolio occupancy rates improved to 92.3% (vs 91.1% in 1QFY21) with retention rate high at c.77% for the quarter. We note that Mapletree Industrial Trust’s flatted factories saw an improved to 88.1% (vs 85.4% a quarter ago)
  • which was mainly due to the removal of Kolam Ayer cluster in their statistics. On a “same-store basis”, flatted factory occupancy rates remain stable. Overall occupancy rates for its other asset classes remain stable.

Rental reversionary trends mixed.

  • There was active leasing done during the quarter with high renewal leases across the various subsectors. That said, we note rental reversionary remain negative for flatted factories (-2.3%) and stack-up (- 5.1%) but the Business Parks saw a positive rent reversion of 5.0%, mainly due to expiry of a fairly long lease that was signed > 5 years ago.
  • The manager remain a cautious stance that despite the stable COVID-19 trends, the outlook remain fragile and the manager will continue to actively manage occupancy (if able to) and forego rental growth in FY21 in order to defend cashflows, which will bring about resilience for the portfolio over time.

Proposed acquisition in the US datacenter market.

Derek TAN DBS Group Research | Dale LAI DBS Research | https://www.dbsvickers.com/ 2020-10-29
SGX Stock Analyst Report BUY MAINTAIN BUY 3.250 SAME 3.250