Mapletree Industrial Trust - OCBC Investment 2021-07-28: Good Start To New Financial Year


Mapletree Industrial Trust - Good Start To New Financial Year

  • Mapletree Industrial Trust's 1QFY22 DPU jumped 16.7% y-o-y to S$0.0335.
  • Portfolio occupancy improved to 94.3%.
  • Rental reversions mixed.

Mapletree Industrial Trust's 1QFY22 results in-line with our expectations

  • Mapletree Industrial Trust (SGX:ME8U) reported a good set of 1QFY22 results which met our expectations. Gross revenue and NPI jumped 29.2% and 33.1% y-o-y to S$128.1m and S$104.7m, respectively. Growth was driven by contribution from the acquisition of data centres in North America and absence of rental reliefs granted in 1QFY21 to eligible tenants under the COVID-19 (Temporary Measures) Act 2020.
  • Mapletree Industrial Trust's DPU in 1QFY22 grew 16.7% y-o-y to S$0.0335 and accounted for 25.7% of our FY22 forecast. The increase was partly due to the retention of ~S$7.1m (~S$0.0032 per unit) of tax-exempt income in 1QFY21 in light of uncertainties over the COVID-19 pandemic. If we exclude this, MIT’s DPU would still have grown 5.0% y-o-y. Of this S$0.0335 DPU, S$0.0221 had already been paid out as an advanced distribution.

Resilient portfolio metrics notwithstanding some negative rental reversions

  • Mapletree Industrial Trust’ s portfolio occupancy improved by 0.8 percentage points (ppt) to 94.3%, with increases seen both in Singapore (+0.5 ppt to 93.4%) and North America (+0.2 ppt to 97.8%). Rental reversions for renewal leases were mixed, coming in flat for Stack-Up/Ramp-Up Buildings and Light Industrial Buildings, negative for Business Park Buildings (-7.0%) and Flatted Factories (-1.5%), but positive for Hi-Tech Buildings (+0.5%). However, average rental rate for Mapletree Industrial Trust’s Singapore portfolio rose 3.9% q-o-q to S$2.13 psf/month in 1QFY22.

Temporary decline in aggregate leverage ratio to 31.0%

ESG rating of ‘B’ by MSCI

  • Mapletree Industrial Trust’s ESG rating was downgraded by MSCI to ‘B’ in Oct 2020, from ‘BB’ previously. The downgrade was largely driven by an increase in Mapletree Industrial Trust’s recurring related party transactions with its controlling shareholder, which could undermine the interests of minority shareholders, according to MSCI ESG Research.
  • Furthermore, Mapletree Industrial Trust’s classified board structure and lack of provisions such as proxy access or majority voting, may limit minority investors’ ability to influence company decisions. Although the number of transactions with its sponsor has increased, we believe there are mitigating factors to protect minority unitholders’ interests, such as having the properties to be acquired being valued by an independent valuer.
  • Furthermore, Mapletree Industrial Trust has historically been able to acquire properties from its sponsor at a discount to the independent valuation and make it DPU and NAV accretive to unitholders.

OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2021-07-28
SGX Stock Analyst Report BUY MAINTAIN BUY 3.410 SAME 3.410