Mapletree Industrial Trust - CGS-CIMB Research 2021-04-30: Improving Outlook


Mapletree Industrial Trust - Improving Outlook

  • Mapletree Industrial Trust's FY21 DPU of 12.55 cents beat our estimates at 102.7% of our FY21F forecast.
  • Sequential improvement in portfolio occupancy, new contributions to boost FY3/22F income.
  • Upgrade Mapletree Industrial Trust to ADD with a higher DDM-based target price of S$3.05.

Mapletree Industrial Trust's 4Q & FY21 results highlights

  • Mapletree Industrial Trust (SGX:ME8U) reported a 18.9%/17.3% y-o-y rise in 4QFY21 (Jan 2021 to Mar 2021) revenue/NPI to S$121.1m/S$91.8m respectively, due to the consolidation of 14 US data centres (DC), partly offset by rental rebates extended to tenants and loss of income from redevelopment of Kolam Ayer 2 (KA2).
  • Mapletree Industrial Trust's 4Q21 DPU of 3.30 cents, +15.8% y-o-y, includes a S$7.1m (0.3 cents) release of tax-exempt income withheld previously. FY21 DPU of 12.55 cents (+2.5% y-o-y) is slightly ahead of our expectations at 102.7% of our FY21 forecast.
  • Mapletree Industrial Trust took a ~1.3% haircut to its Singapore portfolio value in FY3/21 with BV standing at S$1.66/unit.

Portfolio occupancy improved q-o-q

  • Mapletree Industrial Trust's portfolio occupancy continued to tick up sequentially to 93.7% at end-4Q, led by a 0.7% pt pick-up in Singapore portfolio occupancy to 92.9% and full occupancy at the recently acquired Virginia property. However, average Singapore rents slipped 2.8% q-o-q.
  • While Mapletree Industrial Trust guided that it gave a higher aggregate amount of tenant rent reliefs in 4QFY21, rent arrears were slightly lower q-o-q at 1.2% of the previous 12 months’ revenue (vs 1.4% in 3Q).
  • Looking ahead, Mapletree Industrial Trust has 14.8%/18.2% of its gross rental income to be renewed in FY22-23F, mainly from its Singapore portfolio. While operating environment appears to be stabilising with signs of business recovery in Singapore, management indicated that some near-term pressure on rent reversions is likely to continue.

New contributions from Virginia acquisition from FY3/22F

  • Mapletree Industrial Trust completed the acquisition of a data centre and office in Virginia, US for US$207.8m in Mar 2021. The property is fully leased on a triple net basis with the initial lease term expiring in Jun 2022 with three five-year renewal options.
  • In addition, divestment of 26A Ayer Rajah Crescent for S$125m is slated for completion in 2QCY21. The sale price is 18.1% above the total development and transaction cost. Once completed, Mapletree Industrial Trust could potentially distribute part of the divestment gains.
  • Meanwhile, the planned redevelopment of KA2 into a new hi-tech industrial precinct with a gross floor area of 865.6k sqft, commenced construction in late Nov 2020 and completion is scheduled for 2H22F. Mapletree Industrial Trust guided that it targets to achieve a 7% yield on cost from this redevelopment exercise.
  • While Mapletree Industrial Trust’s gearing rose to 40.3% at end-4Q, following the purchase of the Virginia property, it is still well positioned to continue to tap into inorganic growth opportunities, in our view.

Upgrade Mapletree Industrial Trust to ADD rating

LOCK Mun Yee CGS-CIMB Research | EING Kar Mei CFA CGS-CIMB Research | 2021-04-30
SGX Stock Analyst Report ADD UPGRADE HOLD 3.05 UP 3.030