Mapletree Industrial Trust:
BUY S$1.39; Bloomberg: MINT SP
Price Target : 12-Month S$ 1.52 (Prev S$ 1.63)
•DPU of 2.43 Scts in line
•Steady earnings growth backed by decent operational performance and completion of development projects
•BUY, TP revised to S$1.52
1Q14 DPU of 2.43 Scts in line. Mapletree Industrial Trust ("MINT") reported gross revenue and net property income of S$75.1m and S$52.5m respectively, which were higher by 12% and 9% y-o-y. The better performance was largely due to higher rental reversions achieved portfolio-wide (average portfolio rents increased by 1.7% to S$1.71 psf), supported by higher occupancy levels achieved in Flatted Factories, Business Parks and Hi-Tech Buildings. MINT’s portfolio occupancy continues to remain stable at c95.4%. Distributable income was 9% higher y-o-y at S$40.2m (DPU of 2.43 Scts). On a sequential basis, distributions grew by c3.3%.
Manager expects operational outlook to remain stable. Looking ahead, the Manager is looking to improve portfolio WALE (currently at 2.4 years) and income certainty for the REIT through offering tenants longer-term leases, which offer lower-than-market starting rents and staggered rental escalations. Take-ups have been positive, resulting in the strong retention rates of c84% for the portfolio. In addition, the Manager has back-filled c10% of the space vacated by Credit Suisse (which contributed c.4.3% of income). While sequential performance might see a dip, the loss of income is expected to be partly offset by positive rental escalations of up to c10% given the positive spread between expiring and spot rents.
On track to deliver asset enhancements/developments. MINT is investing close to cS$233m in various asset enhancement initiatives (Woodlands Central, Toa Payoh North 1 and The Signature) and developments (Kullicke & Soffa and Equinx), which remain on track for completion by towards the end of 2013/2014. These properties should contribute positively to the trust’s performance in the medium term. In addition, management continues to look at acquisition opportunities and might look towards potential development projects in Malaysia (after the expiry of its Singapore mandate in Sept’13).
BUY, TP S$1.52. At FY14F-15F yields of 6.8%- 7.2%, MINT offers investors a steady growth profile which is visible and achievable. Upside surprise is expected to come from acquisitions which we have not factored in. Our TP is revised to S$1.52 as we raise our risk free assumption to 2.6% from 1.8%.
Publish date: 29/07/13