Mapletree Industrial Trust - Maybank Research 2022-10-06: Improving Fundamentals, Remains Focused On ESG

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MAPLETREE INDUSTRIAL TRUST (SGX:ME8U)

Mapletree Industrial Trust - Improving Fundamentals, Remains Focused On ESG

• Under our extended ESG 2.0 methodology, Mapletree Industrial Trust receives an above-average score of 54 vs the 50 average.
• Mapletree Industrial Trust’s sustainability framework is progressive, with targets validated by Net Zero (RCP 2.6) and Business-as-usual (RCP 8.5) scenario analysis. We believe improvements in GHG emissions, further disclosure on renewable energy and green financing could help drive a higher score.

GHG emissions driven by new data centres

• Mapletree Industrial Trust (SGX:ME8U) has an established framework and internal policies, but could further improve on its quantitative “E” metrics. We saw a large increase in Mapletree Industrial Trust’s Scope 2 GHG emissions in FY21, mainly due to four additional data centres under operational control in North America.
• Notably, lower scope 2 emissions are observed in its Singapore portfolio and partially offset the overall increase.
• In our view, Mapletree Industrial Trust needs to deepen its renewable energy efforts against the backdrop of utility rate hikes, taking assets such as data centres and hi-tech buildings into consideration. We believe scores could be higher with further disclosure on renewable energy usage.

Moving towards its ESG targets

• In FY21, Mapletree Industrial Trust made progress in rolling out sustainability clauses for new leases in high-tech and business park assets. Among its ESG targets, Mapletree Industrial Trust has lowered electricity intensity by 9% (from FY20 basis), vs 15% target for its Singapore’s portfolio by 2030. Similarly, Scope 2 emissions in FY22 are 13% lower from FY20, against the 17% reduction target by 2030.
• Notably, ESG forms part of Mapletree Industrial Trust management’s remuneration.

Staying prudent

• Mapletree Industrial Trust's gearing stands at 38.4% in 4Q22 and 1Q23, with the cost of borrowing at 2.5% (vs.2.4% in 4Q22). We expect a 50bps increase in interest rates, lowering DPU by < 1%. Total borrowing is S$2941m, 72.3% hedged at fixed rate.
• Green financing accounted for 13.4% of Mapletree Industrial Trust's total borrowing in FY21; this data wasn’t published for FY22. Continued disclosure on green financing would be a plus.
• See
  • Mapletree Industrial Trust's Share Price,
  • Mapletree Industrial Trust's Target Price,
  • Mapletree Industrial Trust's Analyst Reports,
  • Mapletree Industrial Trust's Dividend History,
  • Mapletree Industrial Trust's Announcements,
  • Mapletree Industrial Trust's Latest News.
• Maintain BUY recommendation on Mapletree Industrial Trust with DDM-based target price of S$3.00 (COE: 6.6%, LTG: 2.0%).

Read also ESG assessment reports of other industrial S-REITs:

• CapitaLand Ascendas REIT - Maybank Research 2022-10-06: Front Runner In The ESG Race Among Industrial S-REITs.
• ESR-LOGOS REIT - Maybank Research 2022-10-06: Steady Progress, New-Economy Play With Low ESG Risk.
• Mapletree Logistics Trust - Maybank Research 2022-10-06: Riding The Renewables Wave ~ Logistics Play With An ESG Touch.

Li Jialin Maybank Research | https://www.maybank-ke.com.sg/ 2022-10-06

SGX Stock Analyst Report BUY MAINTAIN BUY 3.000 SAME 3.000