Analysts from Maybank Securities, OCBC Investment Research and UOB Kay Hian have recommended “buy” on Mapletree Industrial Trust (MINT) after the REIT reported a distribution per unit (DPU) of 3.49 cents, up 6.4% y-o-y for the 3QFY2022 ended December on Jan 25.
Maybank analyst Chua Su Tye has kept his target price unchanged at $3.35 as MINT’s DPU stood within expectations. His forecasts for the FY2022 have also remained the same.
To him, MINT boasts “stronger fundamentals with improved DPU visibility from its rising data centre tenancies”.
While MINT’s management expects rents from the industrial sector to bottom out in the 2HFY2022, Chua expects its deal momentum to pick up into the coming quarters with an estimated debt headroom of $1.4 billion.
“We see acquisition growth from more sizeable deals (in US and Europe), as it aims to deepen its data centre core and further diversify its assets under management (AUM),” he writes in his Jan 26 report.
To this end, Chua sees MINT’s DPUs being supported by contributions from on-going redevelopment projects and asset enhancement initiatives (AEIs), as well as contribution from the various US data centres that were acquired from the 3QFY2018.
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To Chua, MINT’s net property income (NPI) should gradually increase from higher contributions from triple-net leases.
“We forecast data centres in Singapore and the US to generate 59% of MINT’s NPI in FY2022, up from 31% in FY2020,” he says.
Despite MINT’s DPU meeting its expectations, the research team at OCBC has lowered its fair value estimate to $3.30 from $3.42.
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The lower target price takes into consideration a lowered cost of equity (COE) assumption to 6.3% from 6.4% “on account of an improvement in MINT’s environmental, social and governance (ESG) rating”.
MINT’s ESG rating was upgraded by the OCBC team in November 2021, with the upgrade largely driven by improvements in its corporate governance practices.
“Although there were previously concerns over the number of transactions with its sponsor, we believe there are mitigating factors to protect minority unitholders’ interests. For example, the properties to be acquired have to be valued by an independent valuer,” writes the team in its Jan 26 report.
“Furthermore, MINT has historically been able to acquire properties from its sponsor at a discount to the independent valuation and make it DPU and net asset value (NAV) accretive to unitholders,” it adds.
The lower target price was also due to a lowered estimated terminal growth rate to 1.75% (down from 25 basis points) given the “keen competition for quality data centre assets and a more uncertain macro-outlook”, says the team.
Finally, UOB Kay Hian analyst Jonathan Koh has kept his target price of $3.72, which based on a dividend discount model (DDM) where MINT’s cost of equity is estimated to be at 5.75% and terminal growth to be at 2.0%.
He has also kept his DPU estimates for MINT unchanged.
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Like the analysts before him, MINT’s DPU also stood in line with Koh’s expectations, with an attractive distribution yield of 5.2% for the FY2022 at its current share price.
To this end, Koh has identified catalysts to MINT’s share price as growth from its data centres in Singapore and North America, as well as the acquisition of the remaining 50% stake in its portfolio of 13 data centres from its joint venture (JV) with its sponsor Mapletree Investments.
Units in MINT closed flat at $2.51 on Jan 31, with an FY2022 P/B of 1.4 times and DPU yield of 5.2%, according to UOB Kay Hian’s estimates.
