SINGAPORE (Oct 25): DBS Vickers Securities and Maybank Kim Eng are remaining positive on the outlook of Mapletree Industrial Trust (MIT) post the release of its latest 2Q set of financials, which saw a marginal 0.3% y-o-y growth in quarterly DPU on rising contributions from the high-tech sector.
The research houses reiterate their “buy” calls on the trust with target prices of $2.22 and $2.25, respectively.
In a Wednesday report, DBS analyst Derek Tan says he likes MIT for its diverse overseas ventures, along with well-timed acquisitions and completions of development projects which underpin its steady growth profile and resilience to business cycle fluctuations.
In his view, investors will continue to accord the REIT with strong valuations given its ability to offer “strong certainty of growth”.
“MIT’s resilience is a value trait in this market, but this has yet to be reflected in its current share price,” notes Tan.
Meanwhile, Maybank analyst Chua Su Tye views MIT’s latest set of results as mixed considering the evident dip in Singapore occupancies, which mirrored that of 1Q on earlier supply-side pressures. This has resulted in a cut in DPU estimates by 1-2% after adjusting for lower contributions from business parks.
He nonetheless continues to like the REIT for its strong fundamentals backed by stronger leasing demand, growth visibility from its recent completed Kallang AEI, as well as low gearing which translates to clear acquisition-growth potential that could provide upside to Chua’s three-year DPU CAGR forecast of 5%.
On the other hand, OCBC Investment Research is maintaining its “hold” call on MIT with a lower fair value of $2.01 compared to $2.08 previously, after accounting for lower FY20F projections and higher finance costs.
While the trust’s 2Q set of results came in line with OCBC’s expectations, analyst Andy Wong sees signs of weakness in the Singapore portfolio, with rental reversions for renewal leases coming in negative across all business segments in the latest quarter.
“Looking ahead, MIT’s Mapletree Sunview 1 data centre project will have a full-quarter of contribution from 3Q19, while its 30A Kallang place has increased its committed occupancy to 75% (1Q19: ~43.8%), with most leases to commence by 4Q19. Notwithstanding this, we see the need to moderate our occupancy projections from FY20F amid the current macroeconomic uncertainties,” says Wong.
As at 11.26am, units in MIT are trading flat at $1.95 or a FY19F distribution yield of 6.3% according to OCBC’s projections.
