SINGAPORE (Sept 13): Mapletree Industrial Trust’s strategy making high-tech buildings the focus of its properties portfolio is looking to be a ‘transformational’ move.
In June 2017, MINT completed the development of 1 & 1A Depot Closeback. This was followed by 30A Kallang Place in February 2018. It also completed the acquisition of 18 Tai Seng Street for $271 million in Feb.
At present, high-tech buildings account for 43.3% of MINT’s portfolio valuation compared to 18.9% five years ago. This is also significantly larger than flatted factories which constitute 33.1% of total value.
Data centres also makes up a prominent part of MINT’s portfolio – accounting for 17.7% of its portfolio valuation with 8.6% in Singapore and 9.1% in the US. Back in October 2017, MINT completed the acquisition of a 40% stake in 14 data centres in the US, including a number of quality tenants like AT&T and Vanguard. This provided an initial net property income (NPI) of 6.9% and a rental escalation of more than 2% annually.
Locally, MINT developed two built-to-suit data centres at 26A Ayer Rajah Crescent and 12 Sunview Drive and also embarked on the upgrading of a high-tech building to a data centre at 7 Tai Seng Drive, which is expected to begin contributing from 3Q20 onwards.
In a report on Friday, UOB KayHian lead analyst Jonathan Koh says, “The repositioning towards high-tech buildings and expanded exposure to data centres will help MINT weather macro uncertainties and escalation in trade conflicts. We view acquisitions to further increase exposure to data centres as a positive catalyst.”
Indeed, MINT has shown no signs of slowing down. It has embarked on its largest redevelopment project – converting a flatted factory cluster Kolam Ayer 2 Cluster into a high-tech industrial precinct for a German headquartered global medical device company at total cost at $263 million. And although this could put a dampener on DPU figures for FY21 and FY22, this is likely to reverse after it starts to contribute – a trade-off that is well worth the wait.
In addition, MINT harbours plans of scaling operations across the globe – with acquisitions in the US, Europe and Asia in mind. And it is likely to partner sponsor Mapletree Investments to pursue larger portfolio transactions – with MINT acquiring the data centre on its own for single-asset transactions.
In 1Q19, MINT reported a 3.3% rise in distribution per unit (DPU). Distributable income for the quarter grew 11.1% to $63.2 million while gross revenue rose 8.8% to $99.6 million.
See: Mapletree Industrial Trust posts 3.3% rise in 1Q DPU to 3.10 cents
“MINT’s 2020F distribution yield of 5.5% is higher than 5.2% for Ascendas REIT and 4.5% for Keppel DC REIT,” shares Koh, “We view acquisitions to further increase exposure to data centres as a positive catalyst.”
On the back of a promising outlook, UOB has upgraded MINT to a “buy” with a target price of $2.58.
As at 11.16am, units in MINT are trading one cent higher at $2.31, giving an FY20F dividend yield of 5.5% based on UOB valuations.
