SINGAPORE (Jan 23): DBS Group Research says it is still “too early to call a sustained turnaround” for Mapletree Industrial Trust (MINT), even as a general improvement in occupancy rates across most of its industrial sub-segments is a positive sign.
“This… should allay concerns that occupancy rates will dip further given the uncertain macro climate,” DBS says in a flash note led by analyst Derek Tan on Wednesday.
The way Tan sees it, this implies that the manager’s strategy of maintaining occupancies amid competition is the right one – and could be starting to bear fruit.
MINT on Tuesday announced a 3Q18/19 DPU of 3.07 cents, 6.6% higher a year ago.
This was mainly due to a significant increase in share of profit in a joint venture during the quarter, which surged to $4.02 million, compared to $0.73 million a year ago.
Gross revenue for the quarter was 2.3% higher at $93.6 million, while net property income was 1.4% higher at $71.9 million.
See: Mapletree Industrial Trust posts 6.6% increase in 3Q DPU to 3.07 cents on share of profit in JV
DBS is keeping its “buy” call on MINT with a target price of $2.22.
“While we project rental reversion rates to remain flattish or still with a negative bias in 2H19, we believe that the negative rental reversionary trends are likely to moderate in the coming quarters and should bottom out from the end of FY19,” Tan says.
“We remain positive that MINT offers investors a stable yield with a certainty of growth, underpinned by strategically timed projects and developments,” he adds.
Meanwhile, Daiwa Capital Markets is keeping MINT at “underperform” with a target price of $1.78.
“The leasing trend still showed some weakness with negative rental reversions across all segments ranging from 1.5% (for flatted factory space) to 6.4% (for business parks),” says analyst David Lum in a memo on Wednesday.
“The overall passing rent (psf) of the portfolio also declined quarter-on-quarter from $2.05 to $2.04,” he notes.
As at 3.11pm, units in MINT are trading 1 cent lower at $1.97. According to DBS estimates, this implies an estimated price-to-earnings ratio of 16.8 times and a distribution yield of 6.1% for FY19.
