MAPLETREE INDUSTRIAL TRUST (SGX:ME8U)
Mapletree Industrial Trust - Moving In The Right Direction
- Mapletree Industrial Trust's 2QFY21 DPU down marginally by 1.0% y-o-y.
- Looking to grow its data centres exposure.
- Increase Fair Value by 8% to S$3.51.
Mapletree Industrial Trust's 2QFY21 results in-line with our expectations
- Mapletree Industrial Trust (SGX:ME8U) reported its 2QFY21 results which met our expectations. Gross revenue and NPI rose 1.5% and 2.0% y-o-y to S$103.4m and S$81.6m, respectively.
- Mapletree Industrial Trust's DPU declined marginally by 1.0% y-o-y but improved 8.0% q-o-q to 3.10 cents as there was no income retention during the quarter. For 1HFY21, Mapletree Industrial Trust’s DPU fell 4.2% to 5.97 cents and formed 48.9% of our FY21 forecast.
Improvement in portfolio occupancy; rental reversions mixed
- Operationally, Mapletree Industrial Trust’s portfolio occupancy improved by 1.2 ppt q-o-q to 92.3%, as the 1.3 ppt increase in Singapore to 91.5% was partially offset by a 0.7 ppt decline to 98.0% in the US.
- For Singapore, the improvement was largely driven by Flatted Factories and Light Industrial Buildings, although the former was largely due to the removal of properties in its Kolam Ayer 2 cluster in the calculations due to their ongoing redevelopment.
- Rental reversions for renewal leases were mixed in 2QFY21. Positives came from Business Park Buildings (+4.9%), but Flatted Factories and Stack-Up/Ramp-up Buildings saw negative rental reversions of -2.3% and -3.6%, respectively. Hi-Tech Buildings’ rental reversions were flat during the quarter.
- Management highlighted that the situation is more encouraging for its Hi-Tech and Business Park segments, which are expected to see a stabilisation in rents around mid-2021. However, rental pressures will remain for Flatted Factories and Stack-Up/Ramp-up Buildings, given the higher reliance on SME tenants. These two segments could only see some stabilisation in rents in 2HCY21, with possible negative reversions of approximately -5% for Flatted Factories in the near-term.
- Mapletree Industrial Trust still expects ~S$20m of rental rebates to be provided to tenants for FY20, of which ~S$7.1m has been given in 1HFY21. The balance will be partially or fully offset by the release of the income which was retained in 4QFY20 and 1QFY21.
Capital recycling in motion
- One of Mapletree Industrial Trust’s tenant Equinix Singapore had exercised an option to purchase the 26A Ayer Rajah Crescent data centre property from Mapletree Industrial Trust. While this was not by choice from Mapletree Industrial Trust’s perspective, we note that the divestment price of S$125m comes in at a healthy premium of 23.3% over the property’s development cost of S$101.4m. This transaction is expected to be completed in 4Q20 and the divestment gain of ~S$19m (0.81 cents/unit) will be distributed to unitholders within three years.
- While Mapletree Industrial Trust’s Singapore data centre exposure will be lowered, management had announced on 14 Sep its proposed acquisition of a data centre and office in Virginia, US, from an unrelated third party vendor for a purchase consideration of between US$200.6m (~S$272.8m) and US$262.1m (~S$356.5m). This deal is expected to be DPU accretive and the property is fully leased on a triple-net basis to a multinational company with strong credit standing with a balance lease term of more than five years.
- We increase our fair value estimate from S$3.25 to S$3.51 due to a lower cost of equity assumption of 6.0% (previously 6.3%) on account of Mapletree Industrial Trust’s growing data centre portfolio.
- 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.
- One re-rating catalyst could come from Mapletree Industrial Trust’s potential inclusion into he MSCI Singapore Index, in our view.
OCBC Research Team
OCBC Investment Research
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https://www.iocbc.com/
2020-10-28
SGX Stock
Analyst Report
3.51
UP
3.250
