• 1QFY17 DPU grew 4.4% YoY
• Higher average portfolio passing rents
• Raise FV but maintain HOLD

1QFY17 results met our expectations

Mapletree Industrial Trust (MIT) reported its 1QFY17 results which came in within our expectations. Gross revenue rose 3.0% YoY to S$84.1m, meeting 24.7% of our FY17 forecasts. This was driven by higher rental rates achieved across all its property segments and improved occupancies at its High-Tech Buildings and Business Park Buildings.

NPI increased at a stronger pace of 6.0% YoY to S$63.8m as a result of better margins for all its business segments, with the exception of Light Industrial Buildings. DPU of 2.85 S cents represented a growth of 4.4% and constituted 25.6% of our full-year projection.

Mixed rental reversion figures for renewal leases

During the quarter, MIT achieved positive rental reversions of 1.3% and 2.1% for its Flatted Factories and Hi-Tech Buildings for its renewal leases. However, renewal rental reversions were negative for its Business Park Buildings (-1.5%) and Stack-Up/Ramp-Up Buildings (-4.7%).

Average portfolio passing rents came in at S$1.92 psf/month, marginally higher than the S$1.90 psf/month rental rate achieved as at end-4QFY16. Due to MIT’s active lease management, it lowered its expiring leases (by gross rental income) from 21.1% in the preceding quarter to 14.1%. Overall portfolio occupancy slipped slightly from 94.6% (as at 31 Mar 2016) to 93.0%, with the main drag coming from its Light Industrial Buildings (-11.4 ppt QoQ).

Maintain HOLD

In terms of financial position, MIT has a healthy aggregate leverage of 28.2%, which is one of the lowest within the S-REITs universe. 87.6% of its debt has been hedged for a weighted average term of 2.7 years. Although S$470m of its interest rate hedges will expire in FY17, MIT has already extended or replaced S$200m of these.

It expects the replacements of expiring hedges to be more costly in view of the low interest rates of these hedges entered in the past. We retain our forecasts given this in-line set of results, but raise our fair value from S$1.64 to S$1.67, as we factor in a lower risk-free rate assumption of 2.4% (previously 3.0%) in our model. Maintain HOLD.

Source: OCBC Research - 27 Jul 2016