Maybank Securities analyst Krishna Guha has kept his “hold” call with a lower target price of $2.30 on Mapletree Industrial Trust (MINT) ME8U , noting that the REIT’s tenant bankruptcy has added to its headwinds. Guha’s previous target price on the REIT was $2.45.
On June 6, MINT announced that its third-largest tenant had initiated bankruptcy proceedings with rent for May partly due. The tenant occupies space in eight of MINT’s data centres across North America. Of the eight, seven of the data centres occupied are joint venture (JV) assets with MINT’s sponsor. The tenant contributes about 3.2% of the REIT’s monthly gross rental income (GRI) as at March 31. If the proposed Osaka acquisition goes through, the tenant would be MINT’s fourth-largest, contributing 3.0% to the REIT’s enlarged portfolio by GRI.
While the news and its timing came as no surprise to Guha, the analyst says he still views the announcement “negatively” especially for a ‘growth’ sector like data centres.
Given the negative news flow from MINT’s peers and other tenants such as AT&T and SunGard, the analyst notes that this raises concerns on whether the data centre growth story is beginning to unravel.
“Further, the negative news comes just after the placement and we hope it is not a sector trend,” he says.
“Finally, it raises a few questions about MINT’s leasing strength in the US and the level of oversight management has on tenant operations on an ongoing basis. All that said, we expect MINT to mitigate the impact given its diversified portfolio and tenant base,” he adds.
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In addition to his lowered target price, Guha has also lowered his distribution per unit (DPU) forecasts by 1% to 3%. The lowered DPU forecast takes into consideration the pro forma 2.1% DPU accretion from the Osaka deal and the potential impact from the REIT’s tenant’s bankruptcy, which is estimated to lower the REIT’s DPU by 3.5%.
“Our concerns remain on local manufacturing slowdown and today’s news further adds to potential downside risks for data centre assets as well,” he says.
As at 1.41pm, units in MINT are trading 1 cent higher or 0.45% up at $2.23.
