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Mapletree Industrial counting on US data centres to mitigate domestic headwinds

PC Lee
PC Lee1/25/2018 11:46 AM GMT+08  • 3 min read
Mapletree Industrial counting on US data centres to mitigate domestic headwinds
SINGAPORE (Jan 25): Mapletree Industrial Trust (MINT) reported 1.8% higher 3Q18 DPU of 2.88 cents compared to a year ago on 8.3% higher revenue and 11% higher NPI.
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SINGAPORE (Jan 25): Mapletree Industrial Trust (MINT) reported 1.8% higher 3Q18 DPU of 2.88 cents compared to a year ago on 8.3% higher revenue and 11% higher NPI.


See: Mapletree Industrial Trust posts 1.8% increase in 3Q DPU to 2.88 cents

The performance was largely driven by HP’s build-to-suit (BTS) contribution, as revenue and NPI for its hi-tech buildings segment jumped 53.3% and 67.6% y-o-y.

MINT's portfolio occupancy improved q-o-q from 90.4% to 90.5%. This was buoyed by its new US data centre portfolio at 97.4% as Singapore occupancy fell from 90.4% to 90.1%.

Maybank Kim Eng is raising DPUs by 3% following stronger-than-expected 3Q18 results.

Maybank says MINT’s solid fundamentals have helped it deliver the strongest share-price action among its peers.

"We see further momentum from recovering industrial sector tailwinds, rising hi-tech contribution, and overseas acquisition growth traction," says analyst Chua Su Tye in a Wednesday report.

Maybank is raising its DDM-based target price to $2.20 and estimate 6-16% DPU upside from potential deals, not yet priced into valuations.

"With 12.5% total return upside, we maintain 'buy'," says Chua who has cut his target price to $2.07 from $2.10 previously.

Phillip Capital is maintaining its "neutral" call with $2.15 target price given the oversupply situation in Singapore is improving, with the tapering of new supply in 2018.

Gross revenue and DPU were 4.1% and 3.6% higher than what the research house expected. The vacated space by Johnson & Johnson at The Strategy is now 23% back-filled while the manager has secured 12% commitment for 30A Kallang Place and Kallang Basin 4 Cluster asset enhancement initiative (AEI).

However, portfolio weighted average rental reversion came in at negative 1.18%, dragged down by flatted factories and stack-up/ramp-up buildings.

Singapore occupancy was also marginally lower, dropping to 90.1% from 90.4% dragged down by flatted factories and business park buildings.

However, overall portfolio is marginally higher at 90.5%, after taking into account the 40% proportionate share of the US data centre portfolio that is 97.4% occupied.

CIMB admits it was too early to downgrade MINT on valuations. Acknowledging continued interest in the sector, the research house has therefore upgraded MINT to "add" from "hold" with higher $2.16 target price.

"Backed by BTS for HP, another BTS for a new data centre, full-year contribution from the US data centres and ramp-up in 30A Kallang Place, we project 4.6% DPU CAGR for FY17-FY20," says analyst Analyst Yeo Zhi Bin.

Yeo has been encouraged by healthy signing rents at 30A Kallang Place of $3.50 psf pm. This is higher than his forecast sub-$3.00 psf pm and higher than average rents of $1.95 at other buildings in Kallang Basin 4 cluster.

At stabilised 85% occupancy, the average passing rent could translate to more than 9% yield on cost for the development.

"We have increased his FY18 DPU on higher revenue assumptions, and tweaked our FY19F/20F by -0.2%/+0.3%," says MINT.

As at 11.4am, units in MINT are up 1 cent at $2.13 or 6.2% FY19 yield.

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