Why a data centre at 7 Tai Seng Drive makes 'perfect sense' for Mapletree Industrial: DBS

Why a data centre at 7 Tai Seng Drive makes 'perfect sense' for Mapletree Industrial: DBS

By: 
Michelle Zhu
30/04/18, 12:30 pm

SINGAPORE (Apr 30): DBS Vickers Securities is maintaining its “buy” call on Mapletree Industrial Trust (MIT) with a target price of $2.22, which has yet to price in the REIT’s potential acquisition of a warehouse at 7 Tai Seng Drive for $68 million from Mapletree Logistics Trust (MLT).

In a Monday report, DBS lead analyst Derek Tan highlights that the property was valued at $69 million by independent valuers Cushman & Wakefield and Savills, which was notably higher than the valuation of $36.1 million on MLT’s books.

In his view, the variance in valuation was largely due to a “change in use” for the property given MIT’s plan to convert it from a warehouse building into a high-specification industrial building – which points to the likely repositioning of the warehouse into a data centre.

“Pursuant to the agreement [with its sponsor and MLT], MIT will undertake c.$95 million worth of upgrading works to increase the power capacity and floor loading capacity, and to provide additional telecommunication infrastructure as well as space for mechanical and electrical equipment. Judging by the high-specification upgrades, we believe that MIT will likely be repositioning the warehouse into a data centre, in our view,” says Tan.

According to him, such a development opportunity “makes perfect sense” for the REIT to undertake as it would build a future pipeline from the value-accretive deal.

He adds that securing a tenant on a long-term contract would also translate to a “secured and certain” income stream upon development completion.

Although potential yields for the Tai Seng asset have not be disclosed, the analyst estimates MIT to achieve yields of 6.5-7% post the acquisition, which is similar to its historical average.

“While it will only be accretive to MIT’s distributable income from the second half of 2019 (FY20F), we are positive on the strategic addition of 7 Tai Seng Drive as it improves portfolio earnings visibility and quality,” says Tan.

“We have not priced in this acquisition, subject to JTC approval. MIT, with ample debt capacity to debt fund this development, is expected to see its gearing rise slightly to c.33%, still at a comfortable level,” he adds.

As at 12.27pm, units in MIT are trading 1 cent lower at $2.01 or 17.1 times FY19F book.

2019 GDP growth to ease to 'slightly above midpoint' of 1.3-3.5% forecast: MAS

SINGAPORE (Apr 26): MAS expects GDP growth to come in slightly above the mid-point of 1.3-3.5% forecast range in 2019, as growth momentum of the global economy has moderated at the turn of the year amid sluggish trade. This was according to the Guide to the Macroeconomic Review April 2019, released by the Monetary Authority of Singapore’s (MAS) Economic Policy Group on Friday morning. On the back of easing GDP growth, MAS has decided to maintain the current rate of appreciation of the SGD NEER policy band. This policy stance is consistent with a modest and gradual appreciation path of ....
Read More >>

CapitaLand Mall Trust kept at 'hold' by OCBC and Maybank on higher mall supply, soft retail sector

SINGAPORE (Apr 26): OCBC Investment Research says CapitaLand Mall Trust’s (CMT) 1Q19 results met its expectations. Gross revenue rose 10.0% y-o-y to $192.7 million while NPI jumped 11.5% to $140.1 million, forming 25.1% of its FY19 forecast. See: CapitaLand Mall Trust declares 3.6% higher DPU of 2.88 cents on higher income OCBC says Funan has already achieved high pre-commitment levels of 90%, and is on track to open in the middle of 2019 and will thus contribute to CMT’s earnings progressively from 2H19. However, the near-term outlook remains cautious given the higher supply, ....
Read More >>

Singapore's GLP plans US$3 billion IPO for its US warehouses

(Apr 26): Singapore-based GLP is planning an initial public offering (IPO) for its US operations that could raise about US$3 billion ($4.09 billion). GLP may seek to value the operations at more than US$20 billion, and the firm is said to have confidentially filed with securities regulators for the planned offering. Much of GLP’s US business stems from a 2014 deal to acquire IndCor Properties from Blackstone Group for US$8.1 billion. The offering could help GLP recoup funds after it was taken private by a management-backed consortium from the Singapore stock exchange last year. GLP ....
Read More >>