• 4QFY17 DPU + 2.5% YoY
• Healthy balance sheet
• 6.7% FY18F distribution yield

4QFY17 Results Within Our Expectations

Mapletree Industrial Trust (MIT) reported its 4QFY17 results which met our expectations. Gross revenue increased by 4.5% YoY to S$87.8m. Growth was underpinned by higher rental rates for its Flatted Factories, Hi-Tech Buildings and Stack-up/Ramp-up Buildings, coupled with contribution arising from Phase One of the built-to-suit project for Hewlett-Packard Singapore from mid-Dec 2016, but partially offset by lower portfolio occupancy.

NPI jumped 6.4% YoY to S$66.0m, driven by higher margins (75.1%; +1.3 ppt YoY) due largely to lower property maintenance expenses and marketing commission. DPU came in at 2.88 S cents, representing YoY growth of 2.5%. For FY17, MIT’s gross revenue rose 2.7% to S$340.6m and formed 99.1% of our forecast. DPU grew 2.2% to 11.39 S cents and accounted for 100.9% of our FY17 projection.

Another Resilient Performance

Despite headwinds facing the industrial sector, MIT’s operational performance remained largely resilient. Its average portfolio gross rental rate inched up 0.5% QoQ to S$1.94 psf/month in 4QFY17, while overall occupancy rate improved by 1 ppt QoQ to 93.1%. There were mixed signals from renewal leases signed during the quarter. Positive rental reversions were recorded for Hi-Tech Buildings (+4.0%), Business Park Buildings (+1.0%) and Flatted Factories (+0.6%), but its Stack-up/Ramp-up Buildings and Light Industrial Buildings saw negative rental reversions of 4.3% and 0.6%, respectively.

In terms of financial position, MIT’s balance sheet remains strong, with a low aggregate leverage ratio of 29.2%, as at 31 Mar 2017. 74.9% of its borrowings have been hedged. The weighted average hedge tenor is 4.0 years, with none of the hedges due to expire in FY18.

Maintain BUY

We incorporate this latest set of full-year results in our model, and fine-tune our assumptions. Our FY18 and FY19 DPU forecasts are reduced marginally by 0.5% and 0.2%, respectively. However, as we roll forward our valuations, we derive a higher fair value estimate of S$1.93 (previously S$1.88). Coupled with a healthy FY18F distribution yield of 6.7%, we maintain BUY on MIT.

Source: OCBC Research - 25 Apr 2017