Lower DPU but positive rental reversions for Mapletree Industrial Trust leave analysts mixed

Analyst opinion is split on Mapletree Industrial Trust (MINT), following the reported results of its 1QFY2024 ending June 30. The trust’s distribution per unit (DPU) dipped 2.9% year-on-year to 3.39 cents, but managed a 1.8% quarter-on-quarter increase, in line with forecasts from OCBC Investment Research (OIR), DBS Group Research and CGS-CIMB Research who have maintained their “add” and “buy” ratings. Maybank Securities stuck to their “hold” call, citing the trust’s stable DPU.

MINT observed higher gross revenue and net property income of $170.6 million and $130.8 million respectively, a 1.7% and 0.7% y-o-y increase. This was largely driven by new lease contributions, offset by higher utilities and maintenance expenses. Primarily, a 100 basis points (bps) increase in borrowing costs y-o-y curtailed the trust’s DPU growth.

On the subject of interest rates, every 100 bps base rate uptick is expected to have a negative -1.4% impact on MINT’s 1QFY2024 pro-forma DPU.

OIR took the most optimistic stance on MINT’s performance, raising its target price from $2.77 to $2.78. Its DPU stood at 25.4% of its initial FY2023 forecast. The research team attributes the trust’s attractive outlook to its sizeable portfolio of industrial assets in Singapore and successful data centre holdings in the US and Canada, enabling investors to tap into the rising digitalisation and data outsourcing trend. Furthermore, MINT achieved positive rental revisals from renewal leases, although occupancy rate remains under pressure.

Weighted average rental reversions came in at 5.3%, and its average rental rate for Singapore and North America rose 0.9% and 0.4% q-o-q to $2.18 per square foot (psf) per month and US$2.41 ($3.20) psf per month, respectively.

MINT’s portfolio occupancy rate declined for the second consecutive quarter, down 1.6 percentage points (ppt) q-o-q to 93.3%. Singapore (-1.7 ppt q-o-q) and North America (-1.3 ppt q-o-q) made up this shortfall. The trust’s management views some of these vacancies as transitory.

CGS-CIMB analysts Lock Mun Yee and Natalie Ong rated MINT a “hold”, with a target price of $2.61. Their decision was mostly on the trust’s strong balance sheet and increasing exposure to new economy sectors.

MINT’s proposed acquisition of a data centre in Osaka for JPY52 billion ($507.9 million) would further out its data centre AUM to 56.3% of total FY2023 assets. This could see blended funding costs trending down over the next few quarters.

DBS Group analysts Derek Tan and Dale Lai maintained their “buy” call, with a reduced target price of $2.60. Investors will likely focus on near term risk factors from the expiry of the AT&T lease, which the pair noted and pricing included. The lease is estimated to expire in two years’ time and currently account for about 5.3% of gross rental income.

MINT actively looks to re-let the space and is in advanced negotiations with other tenants to take up expiring spaces or to divest or reposition the property for other uses.

The iconic Woodlands Champions Way Condo has been designed to be a haven where every resident has the choice of leisure time, recreation and relaxation. With its impeccable facilities, this top-notch condominium ensures a lifestyle that is nothing short of modern and luxurious. These amenities include a beautiful swimming pool, gymnasium, BBQ pit, sauna, Jacuzzi, children’s playground and a lush landscaped garden.

Maybank’s Krishna Guha stuck to his “hold” call and the unchanged target price of $2.30. Despite MINT’s high dividend yield of 5.7%, he expressed caution on a slowing manufacturing sector and funding environment.

At 11.55am, shares in Mapletree Industrial Trust are trading 3 cents lower or 1.32% down at $2.24.

Analysts are mixed in their opinion of Mapletree Industrial Trust (MINT) following the reported 1QFY2024 result ending June 30. Its distribution per unit (DPU) fell 2.9% y-o-y to 3.39 cents, but managed a 1.8% q-o-q increase in line with forecasts from OCBC Investment Research (OIR), DBS Group Research and CGS-CIMB Research who retain their “add” and “buy” recommendations. Maybank Securities held to their “hold” call.

Gross revenue and net property income were up as well, at $170.6 million and $130.8 million respectively – a 1.7% and 0.7% increase on the prior year. This was driven by new lease contributions, but partly offset by higher utilities and maintenance expenses. On the impact of borrowing charges, MINT estimates a -1.4% DPU dip when base interest rates rise 100 bps in 1QFY2024.

OIR raised their target price from $2.77 to $2.78, citing MINT’s sizeable portfolio and successful data centre portfolio as attractive growth drivers tapping into the fast-growing digitalisation and data outsourcing trends. Positive rental revisals were also recorded, though occupancy rate remains under pressure. Weighted average rental reversions stood at 5.3% and its average rental rate for Singapore and North America rose 0.9% and 0.4% q-o-q respectively.

CGS-CIMB analysts Lock Mun Yee and Natalie Ong rated MINT a “hold”, with a target price of $2.61, citing the trust’s strong balance sheet and increasing exposure to new economy sectors. The proposed acquisition of a data centre in Osaka to bolster data centre AUM to 56.3% of total FY2023 assets could see blended funding costs trending down over the next few quarters.

DBS Group analysts Derek Tan and Dale Lai maintained their “buy” call, with a target price of $2.60, noting a likely focus on near term risk factors from the expiring AT&T lease. The trust is taking necessary measures by actively seeking to re-let the space and negotiating with tenants to take up expiring spaces or divest the property.

Maybank’s Krishna Guha stuck to his “hold” call with the unchanged target price of $2.30, citing a slowing manufacturing sector and fluid funding environment.

As of 11.55am, shares in Mapletree industrial Trust are trading 3 cents lower or 1.32% down at $2.24.