Thursday, December 12, 2013

Mapletree Industrial Trust : Growing at a slower pace (CIMB)

Mapletree Industrial Trust
Current S$1.35
Target S$1.48
Growing at a slower pace

Positive rental reversions and asset enhancements have mitigated the drop in occupancy rates at The Signature. Although headline yields continue to be attractive, we will wait for clarity on the future backfilling at The Signature and meaningful growth catalysts before turning positive on the stock.

Positive rental reversions are likely to lead to stronger earnings, albeit at a slower pace. Under our new rating structure, our recommendation changes to Hold from Neutral. We maintain our earnings forecasts and DDM-based (discount rate: 8.1%) target price of S$1.48.

Positives offset by tenants exiting
Although positive rental reversions across all property segments of MINT‟s portfolio are expected to contribute to the trust‟s growth in the medium term, we expect the growth rate to be slower given that most of the flatted factories space is already close to the market spot rents of c.S$1.60 psf/month for upper floors. In addition, the improving margins and a higher rental income are likely to be offset by the exit of Credit Suisse (previously accounting for 4.5% of the total gross income) in 2QFY13 and Lucasfilm (c.1% of the total gross income) in 3QFY13.

Limited growth opportunities from foreign acquisitions
With its pure local mandate having expired in Oct 13, MINT can look at expanding overseas. Among the various markets, Iskandar is a natural choice for the REIT. However, various factors such as the lack of skilled labour, relatively low yields and the absence of an established local rental market may lead to difficulties in acquiring yield-accretive projects in the near term.

Wait for meaningful growth catalysts
Additional contribution from the recently completed BTS development for Kulicke & Soffa and AEI projects will mitigate the temporary dip at The Signature. We will wait for more clarity on the backfilling at The Signature and meaningful new growth catalysts before turning positive on the stock.

Source/Extract/Excerpts/来源/转贴/摘录: CIMB-Research,
Publish date: 29/11/13

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