Analysts from DBS Group Research, Maybank Kim Eng, OCBC Investment Research and UOB Kay Hian are encouraging investors to continue accumulating units in Mapletree Industrial Trust (MINT) after the REIT posted its results for 2QFY2020/2021.
See: Mapletree Industrial Trust posts 1% dip in 2Q DPU of 3.10 cents on enlarged unit base
The manager of MINT, on Oct 27, reported distribution per unit (DPU) of 3.10 cents for the quarter, 1.0% down y-o-y on an enlarged unit base.
MINT’s net property income (NPI) and distributable income rose 2.0% and 14.8% y-o-y to $81.6 million and $72.9 million respectively.
On that, DBS Group Research analysts Derek Tan and Dale Lai, along with Maybank’s Chua Su Tye, the research team at OCBC team and UOB Kay Hian analysts Jonathan Koh and Loke Peihao have reiterated their “buy” recommendations on the REIT.
DBS’s Tan and Lai view MINT’s 1HFY2020/2021 results as “promising” as the REIT reverts back to paying its distributions in full in 2QFY2020/2021.
The analysts also continue to see the REIT trading closer to its data-centre peer Keppel DC REIT as MINT continues its addition of data-centres to its portfolio through strategic acquisitions.
Tan and Lai also see the certainty of MINT’s growth as a welcome trait.
“We like its improved earnings visibility of 4.0% compound annual growth rate (CAGR) and capacity to further grow in the datacenter space will keep valuations at a premium,” they write in an Oct 29 report.
“We believe investors have not priced in the ‘value’ in MINT’s portfolio. The redevelopment of its ‘land bank’ of older flatted factories will drive portfolio GFA and drive medium-term growth in distributions and NAV, keeping valuations at a premium,” they add.
Tan and Lai have maintained their target price at $3.25, which assumes a target yield of close to 4.0%.
For Maybank’s Chua, MINT’s results were in line with expectations for consensus and the brokerage’s estimates.
As such, he has maintained his earnings and DPU forecasts for the REIT, as well as his target price of $3.40.
“We continue to favour its positive growth fundamentals and more resilient portfolio, with DPU visibility strengthened by its rising hi-tech asset investments and overseas diversification,” he says.
Chua also expects contributions from MINT’s data centres to rise further to 41.0% of assets under management (AUM) from 38.5% with the acquisition of its 28th US asset in Virginia.
Following its deal in 1QFY2020/2021, the new tenant has contributed about 2.7% to MINT’s gross rental income in 2QFY2020/2021.
Similarly, OCBC’s research team says MINT’s 2QFY2020/2021 results met its expectations; for 1HFY2020/2021, the REIT’s DPU stood at 5.97 cents, down 4.2% y-o-y, which formed 48.9% of the brokerage’s FY2021 forecast.
During the quarter, MINT saw an improvement in portfolio occupancy though rental reversions were mixed.
“For Singapore, the improvement was largely driven by flatted factories and light industrial buildings, although the former was largely due to the removal of properties in its Kolam Ayer 2 cluster in the calculations due to their ongoing redevelopment,” it says.
While the REIT’s data centre exposure in its Singapore portfolio was lowered due to its tenant, Equinix Singapore, exercising an option to purchase the 26A Ayer Rajah Crescent data centre property from MINT, the divestment price of $125 million comes in at a “healthy premium” of 23.3% over the property’s development cost of $101.4 million.
“This transaction is expected to be completed in 4Q2020 and the divestment gain of around $19 million (0.81 cents per unit) will be distributed to unitholders within three years.”
The team is also positive on the REIT due to its “solid financial position, high quality management team and strategy of scaling up its data centre exposure” which would allow it to better withstand the uncertainties ahead.
On that, it has increased its fair value estimate from $3.25 to $3.51 due to a lower cost of equity assumption of 6.0% (previously 6.3%) on account of MINT’s growing data centre portfolio.
“One re-rating catalyst could come from MINT’s potential inclusion into the MSCI Singapore Index, in our view,” it says.
UOB's Loke and Koh report that MINT's results came in above their expectations despite the slight dip.
The REIT's results were boosted by the acquisition of the remaining 60% stake in the 14 US data centres which was completed on Sept 1, 2020, note the analysts.
To this end, Loke and Koh also view the potential acquisition of the remaining 50% stake in 13 data centres in North America as a key catalyst for the REIT.
They have thus raised their target price to $3.45 from $3.10 previously. They have also raised their FY2022 DPU forecast by 10% "due to growth from data centres".
CGS-CIMB analysts Lock Mun Yee and Eing Kar Mei, on the other hand, are not so buoyant on MINT.
Maintaining their “hold” recommendation, Lock and Eing see persisting headwinds for the REIT.
While MINT did not retain any income for 2QFY2020/2021 due to the gradual stabilisation of the Covid-19 situation in Singapore, MINT expects the drag on rents to persist over the next few quarters.
However, the analysts have upped their target price to $3.03 from $2.87 while leaving their DPU estimates for FY2021-2023 unchanged as there are slight upsides to the REIT.
For instance, MINT is seeing strong inorganic growth prospects arising from its Virginia acquisition and its data centre sale to Equinix Singapore.
“While we believe the Covid-19 situation could impact construction cost, benefits from futureproofing its portfolio remain intact. With a gearing of 38.1% at end 2Q, MINT is well positioned to continue to tap inorganic growth opportunities, in our view,” they say.
Units in MINT are trading 1 cent lower or 0.3% down at $3.13.
