• 4QFY18 DPU +2.4% YoY
• Full-quarter contribution from U.S.
• Mixed outlook

4QFY18 Results Within Our Expectations

Mapletree Industrial Trust (MIT) reported an inline set of 4QFY18 results, with gross revenue and NPI both increasing 2.9% YoY to S$90.4m and S$67.9m, respectively. DPU rose 2.4% YoY to 2.95 S cents, supported by a S$3.2m distribution declared by its 40%-owned joint venture which owns a portfolio of 14 data centres in the U.S.

This was the first full-quarter of contribution from the U.S. For FY18, MIT’s gross revenue jumped 6.7% to S$363.2m and formed 101.0% of our forecast. DPU grew 3.2% to 11.75 S cents and constituted 99.1% of our projection.

Some Optimism But Pockets of Weakness Exist

Rental reversions for renewal leases in Singapore appeared soft during 4QFY18, coming in negative for four out of its five segments (Flatted Factories -3.4%; Business Park Buildings -0.8%; Stack-Up/Ramp-Up Buildings -3.8%; Light Industrial Buildings -1.6%). Nevertheless, there were some positives in 4QFY18, as management achieved a high tenant retention rate of 83.8% and the outlook remains slightly more upbeat. There are, however, still pockets of weakness in the market, partly due to supply pressures.

Focus on Ramping Up Occupancy

Looking ahead at FY19, we believe management’s main focus would be to ramp up occupancy at its 30A Kallang Place property which was completed in Feb this year. Committed occupancy stood at 40.2%, as at 31 Mar 2018. Signing rents of ~S$3.50-S$3.80 psf/month have tracked slightly above management’s expectations, and MIT is aiming to hit a committed occupancy of ~90% for this property around year-end. Another focus would be to continue backfilling the space vacated by Johnson & Johnson previously (currently 23% backfilled).

Meanwhile, MIT highlighted that HGST, its ninth largest tenant, was looking to downsize its space requirements at one of MIT’s properties. Notwithstanding this setback, we note that HGST contributed only 1.1% of MIT’s gross rental income.

We lower our FY19 and FY20 DPU forecasts by 2.9% and 3.2%, respectively, largely on lower NPI and higher borrowing cost assumptions. However, our fair value is unchanged at S$2.06 as we roll forward our valuations.

Source: OCBC Research - 25 Apr 2018