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Analysts mixed on MINT after FY2024 results; Maybank lowers TP while OCBC ups fair value estimate

Ashley Lo
Ashley Lo • 6 min read
Analysts mixed on MINT after FY2024 results; Maybank lowers TP while OCBC ups fair value estimate
The recent acquisition of Osaka datacentre improved MINT’s total portfolio value by 0.9% y-o-y in FY2024. Photo: MINT
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Analysts are mixed on Mapletree Industrial Trust ME8U -

(MINT)’s prospects after the REIT’s results for the 4QFY2023/2024 and FY2023/2024 ended March 31. CGS International, DBS Group Research and OCBC Investment Research (OIR) have maintained their “add” and “buy” calls while Maybank Securities kept its “hold” call.

MINT’s “robust earnings” were a “welcome surprise” for DBS analysts Derek Tan and Dale Lai, who deemed MINT’s full-year distribution per unit (DPU) to be ahead of their estimates at 13.0 cents.

“Capital management was effective, keeping [the] cost of debt stable at 3.1% (flat q-o-q), compared to our projection of 3.5%,” they write in their report dated April 26.

Together with the recent acquisition of Osaka datacentre last year and new leases from Mapletree Hi-Tech Park at Kallang Way, MINT reported a 4.4% and 2.2% y-o-y rise to $178.7 million and $131.8 million for its 4QFY2023/2024 revenue and net property income (NPI) respectively. 

Despite the value of the REIT’s Singapore and US portfolio decreasing by 1% and 6% y-o-y respectively, the acquisition of Osaka datacentre improved MINT’s total portfolio value by 0.9% y-o-y in FY2024, note Tan and Lai.

While portfolio occupancy dropped by 1.2% pts q-o-q in 4QFY2024 due to lower occupancy rates in the US portfolio, the REIT’s portfolio performance remained stable with average reversions in Singapore increasing by 6.6% and average rentals for Singapore properties increasing to $2.22 per square foot per month. 

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The REIT also reported a “robust” set of operating metrics and steady reversions, which will drive steady returns in the coming year.

Tan and Lai note that the REIT, which is one of Singapore’s largest industrial landlords, made a “strategic pivot” investing into data centres, worth around $4.4 billion, which currently contributes around 50% of its assets. 

With its assets under management (AUM) valued at almost $9.0 billion, MINT has established itself as one of the biggest new-economy REITs in Singapore.

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“[MINT’s] portfolio of flatted factories is well located across Singapore can be seen as an attractive ‘landbank’ for the REIT,” write Tan and Lai. 

“MINT has over the years embarked on a redevelopment journey for selected assets, extracting untapped gross floor area (GFA) and driving shareholder value through net asset value (NAV) and DPU uplifts as these assets are converted to properties of higher quality and specifications,” they add.

On the expiry of the AT&T leases, MINT’s manager said that it is “actively looking” to re-let a part of or most of its space. AT&T is MINT’s second-largest tenant, contributing 5% of revenues in 2HFY2024 and FY2025.

“We understand that the manager has been able to attract new tenants which will compensate for the risk of income loss. We have priced in 50% occupancy downtime in our estimates,” say the DBS analysts.

Looking forward, the analysts anticipate occupancies in the US to remain “under pressure” resulting from the expiry of leases and potential divestment of more mature properties. However, this impact on gross revenues is expected to be minimised to 1.0%. 

Tan and Lai’s target price remains unchanged at $2.60. 

“We believe that valuations remain inexpensive at 1.26 times P/B, and FY2024 to FY2025 yields of 5.8% are slightly higher than historical averages,” they write. “We see investors gravitating towards MINT especially when overall economic conditions remain uncertain as its diversified portfolio has proven to be able to weather the downturns.”

For more stories about where money flows, click here for Capital Section

CGS analysts Lock Mun Yee and Natalie Ong also liked MINT’s “resilient” results, which were “broadly in line” with their forecasts. MINT’s 4QFY2024 DPU stood at 24.5% of Lock and Ong’s full-year estimates while its FY2024 DPU stood at 97.9% of their estimates. MINT’s long weighted average lease expiry (WALE) of 4.4 years were also positive traits noted by Lock and Ong. 

While MINT’s US data centre portfolio is expected to experience “some frictional vacancy” due to lease expiries and the possibility of repurposing and, or divesting some of the more mature properties, any impact of contributions from a potential replacement tenant is likely to be felt in the latter part of FY2025, in Lock and Ong’s view.

Additionally, the analysts note the REIT’s continued efforts to rebalance its portfolio in Singapore and the US. As recorded at the end of FY2024, MINT’s aggregate leverage reached 38.7%  with its all-in funding cost landing at 3.1%. 

“In terms of strategy, MINT articulated that it would look to continue its portfolio rebalancing efforts through accretive acquisitions and selective divestments of non-core assets,” says Lock and Ong.  

Overall, they have maintained their target price of $2.61 but lowered their FY2025 to FY2026 DPU estimates by 1.91% to 1.94% to factor in the divestment gains from the sale of the Tanglin Halt cluster in March this year, along with a longer vacancy period.

The OIR team has increased their target price by 2 cents from $2.69 to $2.71 as they adjust their DPU estimates. 

“We adjust our FY2025 DPU forecast by +1.9 % as we factor in the divestment gains distribution in our model, and also raise our risk-free rate assumption from 2.75% to 3.00%,” the team writes.

In its April 29 report, the team notes that MINT’s 4QFY2024 results came in within its expectations. The REIT also exhibited “strong” credit metrics. Due to the increase in the proportion of debt hedged by 5.1 percentage points (ppt) q-o-q to 84.6% under a weighted average hedge tenor of 3.7 years, this has provided a buffer in a “higher for longer” interest rate environment. 

Furthermore, the REIT displayed an “encouraging” set of rental reversion figures, which it managed to clock in for its renewal leases in Singapore.

On the whole, the OIR team likes MINT as the REIT offers investors a proxy to the fast growing digitalisation and data outsourcing trends thanks to its portfolio of industrial assets in Singapore which includes data centres, hi-tech buildings, flatted factories and business parks. MINT also managed to grow its data centre portfolio successfully in the US and Canada and made its maiden entry in Japan with the acquisition of an Osaka data centre.

To this end, the team expect MINT to continue shifting its portfolio mix towards more data centres versus old economy industrial assets.

“Although the macroeconomic outlook remains uncertain, MINT’s solid financial position, high quality management team and strategy of scaling up its data centre and hi-tech exposure would allow it to better withstand the uncertainties ahead, in our view,” it writes.

Maybank Securities lowers target price on ‘hazy outlook’

Maybank analyst Krishna Guha is the only analyst to remain neutral on MINT. He has also lowered his target price by 15 cents from $2.30 to $2.15. 

While MINT’s new projects - including redevelopments and acquisitions - grew revenue, higher funding costs mitigated growth in its distributions.

Taking top-ups, lower margins and higher funding costs for joint ventures (JVs) into account, Guha has increased his DPU estimate for FY2025 but has lowered his FY2026 DPU estimate by 4.2%. 

“With DPU and NAV still under pressure from higher operating and borrowing cost and rising cap rates, we maintain our ‘hold’ rating,” explains Guha. 

As at 2.15pm, shares in MINT are trading at 3 cents lower or 1.32% down at $2.24. 

 

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