SINGAPORE (July 1): UBS Global Research is maintaining its “sell” recommendation for Mapletree Industrial Trust (MINT) but raising its target price to $1.50 from $1.45 previously, as valuations remain high.

Based on UBS’ estimates, MINT is currently trading at 16.4 times FY2017 forecast earnings and 15.7 times FY2018 forecast earnings.

UBS analysts Michael Lim and Kok Wai Fai noted that industrial rents have been under pressure with falling leasing demand and increasing supply. The REIT is also seeing low single-digit rent reversions which indicate limited room for organic growth, and fewer opportunities to increase occupancies.

However, despite rising interest rates, the pair says that Singapore REIT managers, and MINT’s managers in particular, have largely been able to remain “one step ahead of the rate-hike cycle”.

“MINT has one of the highest fixed rate or hedged debt at 88%”, says Lim and Kok, adding that every 100 basis point increase in interest rates would reduce MINT’s distribution per unit by less than 2%.

The pair also reduced MINT’s FY2017 DPU forecast by 1.7% to account for the enlarged share base from MINT’s dividend reinvestment plan. But beyond that, the pair expects to see higher returns from MINT’s built-to-suit projects and raised its DPU forecast by 1.3% for FY2018 and 4.5% for FY2019.

“We expect 2016 industrial spot rents to slide 2-6%, [but] the 2017 outlook should improve with a projected recovery in global trade and as new supply tapers off,” says Lim and Kok.

As at 2.51pm, units of MINT are trading 1.16% lower at $1.70.