SINGAPORE (Jan 31): Maybank Kim Eng says Mapletree Industrial Trust’s (MINT) fundamentals are intact.
Its DPUs are backed by improving leasing demand, there is growth visibility from its completed Kallang AEI, and it has a more resilient portfolio following its hi-tech asset investments and US diversification.
Meanwhile, MINT’s low gearing, high debt headroom and clear acquisition growth potential could provide upside to its DPU CAGR forecast, adds the research house.
To recap, 3Q19 DPU of 3.07 cents rose 6.6% y-o-y and was in line with the street; 9M19 was at 75% of full-year, driven by rising hi-tech contributions, which helped offset an uneven industrial sector recovery in Singapore.
“Our DPU forecasts are largely unchanged, and our DDM-based target price stays at $2.20,” says analyst Chua Su Tye in a recent report.
To recap, 3Q19 revenue and NPI rose y-o-y and q-o-q on the back of contribution from the HP build-to-suit (BTS) phase 1 after the expiry of its rent-free period, recently completed Sunview 1 BTS data centre, and 30A Kallang Place post-redevelopment.
Portfolio occupancy improved q-o-q from 86.7% to 88.2% with all segments reporting higher occupancies except for stack-up/ramp-up buildings and light industrial buildings.
Meanwhile, its US portfolio occupancy was unchanged at 97.4%. WALE for its Singapore portfolio increased from 3.5 years to 3.6 years, with long-term leases signed at 30A Kallang Place.
However, management expects the upwards adjustments in rents to lag for another two quarters, and will focus on tenant retention, which should see sequential improvement in occupancies.
At its EGM on 22 Jan, MINT secured approval from its unitholders for the acquisition of 18 Tai Seng from its sponsor at $268.3 million.
The property is at 94.3% committed occupancy with WALE of 3.6 years, and built-in annual rental escalations for 95.7% of its leases.
Management had earlier shared that they are targeting a 6.8% NPI yield with a 3.5% assumption on borrowing cost.
Leverage could rise to 38.7% if the deal is fully debt-funded, and Maybank estimates it could add 2% to FY20 DPU.
Its high-tech properties, now at 42.7% of AUM, looks set to rise.
Units in MINT are trading 1 cent higher at $2.02 giving it an FY20F DPU yield of 6.6%.
