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UOBKH lowers MINT’s TP to $2.93 after its data centre JV’s all-in cost of debt to increase after January expiry

Douglas Toh
Douglas Toh • 4 min read
UOBKH lowers MINT’s TP to $2.93 after its data centre JV’s all-in cost of debt to increase after January expiry
The REIT has in its plans a recycling of assets, through divesting $200 million to $500 million worth of properties in FY2025. Photo: Bloomberg
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UOB Kay Hian (UOBKH) analyst Jonathan Koh has maintained his “buy” call on Mapletree Industrial Trust (MINT) after he sees the REIT manager’s “steady progress” to strengthen its data centre portfolio.

MINT has secured a replacement tenant who is from the healthcare services industry for its Brentwood data centre. The replacement brings the REIT’s occupancy for its US data centres back up to 90% after easing by 3.7 percentage points q-o-q to 86.2% in the 4QFY2024. The vacancy drop was due to AT&T’s decision to not renew its leases for two of MINT’s data centres at Pewaukee, Wisconsin and Brentwood.

The new lease has a long duration of 30 years and provides rental escalation of 2% per year.

The REIT is also working to source for a replacement tenant for its San Diego data centre for when AT&T’s lease expires in December 2024.

The average rental rate of the North American portfolio increased 3.3% q-o-q to US$2.51 ($3.40) psf/month in 4QFY2024 due to short-term extension for 12 months by AT&T for the same data centre, notes Koh.

Should there be no replacement tenant when AT&T’s lease expires then, Koh sees that MINT could divest the data centre. After all, potential buyers could be “plentiful” as San Diego is a vibrant biotech-life science market, he writes in his June 14 report.

See also: RHB maintains ‘buy’ call on IREIT Global with lowered TP of 40 cents following exit of key tenant

In Singapore, MINT will also need to backfill its vacant space at Mapletree Hi-Tech Park. At the moment, Berlin-based manufacturer, Biotronik, is the space’s anchor tenant. It accounts for 29% of the space’s net lettable area (NLA).

Mapletree Hi-Tech Park’s committed occupancy improved by 3.1 percentage points q-o-q to 51.9% in 4QFY2024

On this, Koh writes: “Management continues to source for potential tenants in the advanced manufacturing, information & communication and automation and robotics industries, especially those requiring large and contiguous floor plates. It also targets companies engaged in research and development (R&D), testing and engineering services.”

See also: Brokers' Digest: Marco Polo Marine, APAC Realty, ComfortDelGro, MPACT, First REIT, ThaiBev,

Other key points Koh notes is MINT’s intention to diversify into established data centre markets in Asia Pacific (Apac) namely Hong Kong, Japan and South Korea. The REIT is also looking to diversify into Europe, namely the cities of London, Dublin, Frankfurt, Amsterdam and Paris, to reduce its concentration risk.

The analyst adds: “Management plans to increase scale and deepen its presence in Japan. Data centres in Japan provide positive yield spread and funding in Japanese yen (JPY) would reduce its cost of debt.”

The REIT could also tap on its sponsor pipeline. Its sponsor, Mapletree Investments, acquired a 43,056 sq ft site at Fanling in Hong Kong’s New Territories district for HK$813 million ($139 million) through a land tender in 2021. Mapletree Investments subsequently developed a data centre with a gross floor area (GFA) of 216,785 sq ft at the site, which is just 6km away from the Luohu district in Shenzhen, China.

“Hong Kong has reliable telecommunications infrastructure and power supply. The data centre at Fanling could serve cloud service providers based in Shenzhen and is part of its sponsor pipeline for the Asia Pacific region,” Koh points out.

Despite his “buy” call, the analyst has trimmed his FY2026 distribution per unit (DPU) forecast by 3% to factor in Mapletree Rosewood Data Centre Trust’s (MRODCT) interest rate swaps that expire in January 2025. The expiring interest rate swaps have to be replaced by interest rate swaps at higher interest rates. When that happens, MRODCT’s all-in cost of debt is expected to increase substantially by 2.5 to 3.0 percentage points higher to 5.0%.

As a result, his target price is lowered to $2.93 from $3.02 previously.

On May 30, MINT’s manager announced that its CEO Tham Kuo Wei will leave his position on July 22. Current CFO Ler Lily will be the manager’s new CEO.

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

At the same time, Khoo Geng Foong the current head of treasury at Mapletree Logistics Trust (MLT) will take over as MINT manager’s new CFO.

Ler was the CFO since November 2011 and has played an “instrumental role” in supporting MINT’s expansion into data centres in North America and Japan and development projects in Singapore, Koh notes.

Shares in Mapletree Industrial Trust closed two cents lower or 0.92% down at $2.16 on June 14.

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