Analysts are largely positive on Mapletree Industrial Trust’s (MINT) acquisition of 29 data centres in the US, which the manager of the REIT announced on May 20.
That said, most are waiting for the acquisition to complete before revising their earnings estimates. CGS-CIMB Research analysts Lock Mun Yee and Eing Kar Mei as well as Maybank Kim Eng analyst Chua Su Tye have kept their forecasts unchanged for now, pending the deal closure, which is slated for 3Q2021.
They kept their respective ‘add’ and ‘buy’ ratings for MINT with unchanged target prices of $3.05 and $3.25.
On the other hand, UOB Kay Hian’s Jonathan Koh has upped his target price from $3.55 to $3.62, incorporating a 3% raise to his FY2023 ending March distribution per unit (DPU) forecast to reflect the contribution from the new data centres. His rating has been maintained at ‘buy’.
MINT is acquiring the portfolio of US data centres from Sila Realty Trust for US$1.32 billion ($1.76 billion).
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The analysts all highlight that the deal will be DPU and net asset value accretive. “The acquisition is expected to increase pro forma FY2021 DPU by 3.3% and NAV by 6%,” notes Koh.
Chua highlights that the data centres are underpinned by “positive growth fundamentals”, giving the REIT assets in four new US markets - Chicago, Los Angeles, Silicon Valley and Houston - which are among the top 15 US data centre markets. He believes data centre assets will continue seeing strong demand growth.
The analysts are also positive on the present tenants of the data centres, which Chua describes as “established credit-worthy names”. “87.8% of the new portfolio is leased to 32 tenants, including Fortune Global 500 corporations and NYSE/NASDAQ-listed companies,” Koh explains.
In addition, the long weighted average lease to expiry of the portfolio of 7.9 years and rental escalations embedded in 89.4% of the leases are expected to enhance income stability for the REIT.
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The purchase will increase MINT’s exposure to the data centres segment to 53.6% of the enlarged asset under management (AUM), which management says will make it one of the largest data centre owners amongst APAC-listed REITs. “This is in line with MINT’s target for data centres to make up two-thirds of its portfolio in the medium term,” point out Lock and Eing.
Chua believes further acquisitions are on the horizon for MINT. “With its portfolio recalibration plans well underway, we see further DPU-accretive deals, as management advances diversification efforts to deepen data centre concentration to 50-67% of AUM,” he says.
As at 3.10pm, units in MINT are up 2 cents or 0.73% higher at $2.78.
