• 4QFY16 DPU grew 6.0% YoY
• Stable portfolio occupancy
• Raise FV but maintain HOLD

4QFY16 results within our expectations

Mapletree Industrial Trust (MIT) reported 4QFY16 revenue of S$84.0m, representing an increase of 5.8% on a YoY basis. DPU grew 6.0% to 2.81 S cents and came in within our expectations. For FY16, MIT’s gross revenue rose 5.6% to S$331.6m, and this constituted 100.3% of our full-year forecast. DPU improved 6.9% to 11.15 S cents and this was 1.4% above our projection.

Operationally resilient

MIT’s portfolio occupancy was stable at 94.6% (- 0.1 ppt QoQ), as at 31 Mar 2016, while its portfolio valuation increased 3.9% to S$3.56b, with a slight 25 bps compression in cap rate for its Business Park Buildings.

In terms of rental reversions for renewal leases, MIT achieved positive rental uplifts in 4QFY16 for all its segments (Stack-Up/Ramp-Up Buildings: +2.1%; Flatted Factories: +2.8%; Business Park Buildings: +8.3%), with the exception of Hi-Tech Buildings (-4.9%). The negative rental reversion was attributed to more competitive rents given to a major tenant which took up additional floor space.

In response to media reports that Johnson & Johnson (J&J) may shift out of MIT’s The Strategy building ahead of its lease expiry, management acknowledged that this was a possibility, but there has been no official confirmation as yet. It could take a period of nine to 12 months for MIT to fill up the vacated space should J&J decide to leave, according to management’s estimates.

Maintain HOLD

We incorporate MIT’s latest full-year results in our model, and factor in its Kallang Basin 4 Cluster AEI, which comprises the development of a 14-storey Hi-Tech Building (additional GFA of 336k sq ft) located at Kallang iPark.

Given MIT’s continued solid execution, resilient performances and healthy financial position (one of the lowest aggregate leverage within S-REITs sector), we lower our cost of equity assumption from 8.7% to 8.2%.

Rolling forward our valuations, we derive a higher fair value estimate of S$1.64 (previously S$1.48). However, given MIT’s 7.9% share price appreciation YTD, we believe the stock is fairly priced. Maintain HOLD.

Source: OCBC Research - 27 Apr 2016