Excerpts from UOBKayHian report
Mapletree Industrial Trust (ME8U)
- Mapletree Industrial Trust (MINT) continues to generate steady DPU growth of 1.5% in 2QFY25. It registered average rental revision of 10.7% for its Singapore portfolio (hi-tech: 7.6%, flatted factories: 13% and stack-up/ramp-up: 10.9%).
- Occupancy for North American Portfolio improved 3.1ppt qoq to 90.9% due to a new lease with Vanderbilt University Medical Center at Brentwood, Tennessee.
- MINT provides a FY26 distribution yield of 5.9% (DCREIT: 6.4% and KDCREIT: 4.4%).
Maintain BUY. Target price: S$3.05.
Broad-based growth across various asset types
Mapletree Industrial Trust (MINT) reported DPU of 3.37 S cents for 2QFY25 (+1.5% yoy), which is in line with our expectations. Gross revenue and NPI increased 4.2% and 4.6% yoy respectively in 2QFY25, driven by the acquisition of a data centre in Osaka.
Borrowing costs increased by 3% yoy. Distribution from JVs declined 15.5% due to higher borrowing costs as hedges are replaced at higher interest rates.
Commenced new lease with Vanderbilt University Medical Center
Occupancy for its Singapore portfolio was stable at 93.7% (hi-tech: 89.3%, business park: 80.6%, flatted factories: 97.7% and stack-up/ramp-up buildings: 98.2%).
Committed occupancy at Mapletree Hi-Tech Park improved 1.0ppt qoq to 54.5% in 2QFY25. Occupancy for North American Portfolio improved 3.1ppt qoq to 90.9% due to the commencement of a new lease with Vanderbilt University Medical Center.
The average rental rate of the North American portfolio was US$2.48psf per month in 2QFY25.
Achieved healthy positive reversion in Singapore
MINT achieved average rental revision of 10.7% for its Singapore portfolio in 2QFY25 (hi-tech: 7.6%, flatted factories: 13% and stack-up/ramp-up: 10.9%).
The average rental rate of the Singapore portfolio increased 3.2% yoy to S$2.26psf per month in 2QFY25.
Cost of debt has peaked
Aggregate leverage was healthy at 39.1% as of Sep 24. Adjusted interest coverage ratio was resilient at 4.3x. About 80% of its borrowings are hedged to fixed interest rates.
Average cost of debt was stable at 3.2% in 2QFY25. Management expects cost of debt to maintain below 3.3%.
Staying focused on data centres
MINT intends to diversify into established data centre markets in Asia Pacific (Hong Kong, Japan and South Korea) and Europe (London, Dublin, Frankfurt, Amsterdam and Paris) to reduce concentration risk.
Management plans to increase scale and deepen its presence in Japan. Data centres in Japan provide positive yield spread and funding in Japanese yen would reduce its cost of debt.
Continuing to enlarge scale in Japan
MINT has completed the acquisition of an effective interest of 98.47% in a mixed-use facility in West Tokyo, Japan for ¥14.5b (S$129.8m) on 29 Oct 24.
The mixed-use facility comprises: a) a data centre (28%), b) back office and training facilities (48%), and c) an adjacent accommodation wing (24%). MINT’s exposure to Japan has increased from 5% to 6% of AUM.
Valuation/Recommendation
Maintain BUY. Our target price of S$3.05 is based on DDM (cost of equity: 6.75%, terminal growth: 2.2%). The growth comes from data centres located in Singapore, Japan and the US.
In addition, acquisition of the remaining 50% stake in portfolio of 13 data centres (second JV) from sponsor Mapletree Investments and redeveloping flatted factories into hi-tech industrial parks in Singapore.
You can find the full report here and the company website here.
