Mapletree Industrial Trust - More organic growth plans

■ Results in-line. Growth driven by BTS-Equinix and improved occupancies. But rent reversions generally flat to negative.

■ Asset enhancement initiative (AEI) at Kallang Basin 4 to add 317k GFA of high-spec space.

■ MINT has a solid organic growth profile. We tighten our yield target to 7.25% and raise TP 4% to SGD1.49. Maintain HOLD.

What’s New
In 2Q3/16, revenue and NPI came in at SGD82.2m (+6.2%YoY, +1.4%QoQ) and SGD61m (+8.6%YoY, +1.4%QoQ), while distribution per unit (DPU) was 2.79 Scts (+7.3%YoY, +2.2%QoQ). Results were in-line, accounting for about 52% of our full year expectations. Growth was driven by BTS-Equinix continued contribution, as well as improving portfolio occupancies, which have risen for three quarters now: 90.2% (4Q), 93.5% (1Q) and 93.8% (2Q). Rent reversions so far this year averaged flat to negative: +0.3% for factories (67% NPI), -4.6% for business parks (14% NPI). The weak reversions reflect an over-supplied market, which will persist until 2016. Occupancy can be maintained, so long as rents remain restrained. JTC’s recent relaxing of the anchor tenant rule (anchor tenants to occupy 1000sqm from 1500sqm) should help as well.

Technical Analysis
Daily Chart
What’s Our View
The current DPU growth trajectory is mainly due to build-to-suit projects Equinix and Hewlett Packard (from 3Q3/17E). In addition, a new 317k sf High-Tech facility (from 4Q3/18E) will be built at Kallang Basin 4’s car park. Capex is ~SGD77m, and management expects an 8% yield on the project. This AEI and better than expected occupancies lifts our FY3/16-18E DPU estimates from 10.6/10.7/11.8 to 10.7/10.8/11.9 Scts. The full impact of these initiatives will be felt in FY3/19E when DPU could hit 12.4 Scts. As the DPU growth trajectory is fairly certain, we tighten MINT’s target yield from 7.5% to 7.25%, which when applied to FY3/17E’s DPU lifts our TP from SGD1.43 to SGD1.49. Maintain HOLD. (Read Report)

Read Related Reports
1) Mapletree Industrial Trust - Rock-Solid Performer by DBS Group Research, published on 22 October 2015

2) Mapletree Industrial Trust - 2Q16 Analyst Briefing Key Takeaways by Phillip Securities Research, published on 22 October 2015

3) Mapletree Industrial Trust - New AEI a potential medium-term booster by CIMB Research, published on 21 October 2015

4) Mapletree Industrial Trust - Stable, but could face some headwinds by Daiwa Capital Markets, published on 21 October 2015

5) Mapletree Industrial Trust - Yet another solid quarter by Daiwa Capital Markets, published on 20 October 2015

6) Mapletree Industrial Trust - Another rabbit out of the hat by JP Morgan Asia Pacific Equity Research, published on 20 October 2015

Source : Maybank Kim Eng Research

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