MINT’s shares have pulled back along with the broader market and in partial response to rising interest rates. Still, we believe fundamentals are intact, backed by stronger leasing demand and a more resilient portfolio following its hi-tech asset investments and US diversification in 4Q 2017. We also believe low gearing, debt headroom of SGD700m and clear acquisition-growth potential can provide upside to our 3-year 6.3% DPU CAGR forecast. Following the release of its annual report, we adjust our DPU for the latest asset-level details and revenue updates. We also incorporate the finalisation of MINT’s 7 Tai Seng Drive acquisition on 27 Jun. Our DDM-based TP remains at SGD2.25 (WACC 7.2%, LTG 1.5%). BUY.
Industrial sector likely bottomed; hi-tech on the rise
Singapore’s industrial-sector recovery is underway, supported by positive macros and easing supply pressures. Leasing in Apr / May 2018 jumped 18.7% YoY, maintaining its double-digit growth since 3Q17 amid more optimistic expectations by the manufacturing sector. Meanwhile, MINT’s completion of its 30A Kallang Place AEI, development of a BTS data centre at Sunview Way and conclusion of its 7 Tai Seng Drive acquisition should lift its hi-tech contributions from 31% to 34% of Singapore AUM.
MINT’s portfolio has strengthened after its first overseas investment in 4Q17. Its US data-centre JV could potentially double its hi-tech contributions from 21.8% of NPI in FY17 to 40.2% by FY21E. US datacentre leasing demand is expected to grow by an 8.7% CAGR in 2017- 2022E vs a supply CAGR of only 6.8% (source: 451 Research). About 24% of its portfolio by land area is on freehold land while WALE has lengthened from 3.6 to 3.8 years. We see further acquisition potential, given its low 33.1% gearing vs history and peers. The deployment of an estimated SGD700m of debt headroom could add 9-12% to our DPU.
Source : Maybank Kim Eng Research