UOB Kay Hian analyst Jonathan Koh maintains his “buy” call on Mapletree Industrial Trust (MINT), lifting his dividend discount model (DDM)-based target price to $3.72 from $3.63 previously.
He also increased his FY22F and FY23F distribution per unit (DPU) forecast by 1% and 3% respectively, due to strong contributions from the REIT’s newly acquired data centers.
MINT reported a DPU of 3.47 cents for 2QFY22, an 11.9% growth y-o-y, above UOB Kay Hian’s expectations.
See: Mapletree Industrial Trust posts 11.9% higher DPU for 2Q21/22, driven by contributions from US portfolio acquisition
Its gross revenue and net property income (NPI) grew by 50.5% and 47.4% y-o-y respectively. This was driven by the consolidation of the first data centre joint venture with sponsor Mapletree Investments, the acquisition of 8011 Villa Park Drive in Richmond, Virginia, as well as the acquisition of 29 US data centres completed on 22 Jul 21.
The NPI yield for the acquisition of the data centers located across 18 states in the US is 5.1%, says Koh. He adds that the acquisition increased MINT’s assets under management (AUM) exposure to data centers to 56.3%, compared to 41.2% previously.
The portfolio has a long weighted average lease to expiry (WALE) of 7.9 years, which will increase MINT’s overall WALE from 4.0 to 4.6 years. Koh notes that 81.7% of leases are triple net leases with all outgoings borne by tenants, while 89.4% of leases have rental escalation ranging from 1.5 % to 3.0% per year.
The acquisition is estimated to increase pro forma FY21 DPU by 3.3% and NAV by 6.0%, says Koh.
MINT recorded 93.7% portfolio occupancy in 2QFY22. The occupancy of its Singapore portfolio improved marginally by 0.2% to 93.6%, driven mainly by flatted factories.
Meanwhile, the occupancy for its North America portfolio dropped by 3.9% q-o-q to 93.9% due to lower average occupancy of 87.8% for the newly-acquired 29 US data centres. MINT has appointed an external leasing firm to lease out the vacant commercial space at 250 Williams Street in Atlanta to improve the occupancy for its North America portfolio.
MINT aims to allocate two-thirds of its AUM to data centres over the medium term of 3 to 5 years. Koh highlights that the Covid-19 pandemic has boosted demand for its data centres in Singapore and North America. “MINT’s hi-tech buildings, business park buildings and flatted factories are less affected by the Covid-19 pandemic,” he adds.
The REIT is also pursuing more growth through acquisitions of data centers. MINT has the right of first refusal from the sponsor Mapletree Investments to acquire the remaining 50% stake in their second data centre, JV Mapletree Rosewood Data Centre Trust (MRODCT). The acquisition could materialise within 2HFY22.
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MINT is also on the lookout to acquire data centres from third-party vendors, says Koh. It intends to diversify geographically to Europe and other gateway cities in the Asia Pacific region.
As at 12.26pm, units in MINT are up 1 cent or 0.36% higher at $2.75.