Mapletree Industrial Trust - Maybank Kim Eng 2021-05-03: A Strong Finish

MAPLETREE INDUSTRIAL TRUST (SGX:ME8U)

Mapletree Industrial Trust - A Strong Finish

Mapletree Industrial Trust (SGX:ME8U) delivered strong 4Q21 numbers, as revenue and NPI rose 18.9% y-o-y and 17.3% y-o-y. Growth from consolidation of its US data centres was partly offset by rent relief and income loss from the Koyam Ayer 2 Cluster, redeveloped into hi-tech by 2H 2022.
Mapletree Industrial Trust's FY21 DPU, up 2.5% y-o-y, included a release of withheld income in 4Q20, and was 2-3% above MKE’s and consensus’ estimates.
We raised Mapletree Industrial Trust's DPUs forecast by 2-3% and rolled forward valuation to FY22, with DDM-based target price rising to S$3.25 (COE: 6.0%, LTG: 2.0%).

We favour Mapletree Industrial Trust's growth fundamentals and resilient portfolio, with DPU visibility strengthened by its rising hi-tech asset investments and overseas diversification. BUY.

Mapletree Industrial Trust's portfolio occupancy improved q-o-q from 93.1% to 94.1%, helped by the addition of 8011 Villa Park Drive, Virginia in the US, and better performance of the Singapore assets. Occupancies in Singapore rose q-o-q from 92.2% to 92.9%, driven by hi-tech buildings, flatted factories, and stack-up/ramp-up buildings (92.9% to 96.7%).
Tenant retention has been on an uptrend and this rose q-o-q from 69.4% to 85.7%, implying improving underlying demand, against the y-o-y and q-o-q rise in market occupancy.

Gross rents in Singapore fell 2.8% q-o-q (from S$2.11 psfpm to S$2.05 psfpm), in line with expectations. Its flatted factories, hi-tech buildings, and stack-up/ramp-up saw a -3.0-3.5% rental reversion.
In the near term, Mapletree Industrial Trust's management expects its rents to remain pressured, especially for its older business park space. However, we see its portfolio rents bottoming out within the next 1-2 quarters, with occupancies set to rise further, backed by recovery in the industrial sector.

Mapletree Industrial Trust's AUM rose 14.7% y-o-y to S$6.8b due to the US data centres deal and consolidation effects, with gearing rising from 37.3% to 40.3%.
Mapletree Industrial Trust's balance sheet remains strong with 6.4x interest cover, and a S$1.9b debt headroom (at 50% limit). We think management could eye more sizeable deals on the back of rising equity markets and EFR opportunities.
Near term however, leverage could rise (to 45%) due to smaller debt-funded acquisitions.
See

Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-05-03

SGX Stock Analyst Report BUY MAINTAIN BUY 3.25 UP 3.100