Mapletree Industrial Trust (MIT) reported an inline set of 1QFY19 results, with gross revenue and NPI increasing 3.0% and 1.9% YoY to S$91.5m and S$69.5m, respectively. The latter constituted 24.4% of our FY19 forecast.

Growth was driven primarily by contribution from the build-to-suit project for HP Singapore (Private) Limited and pre-termination compensation from HGST Singapore Pte Ltd, but partially offset by lower overall portfolio occupancy rates and higher property operating expenses.

DPU rose 2.7% YoY to 3.0 S cents, supported by a S$3.2m distribution declared by its 40%-owned joint venture (owns a portfolio of 14 data centres in the U.S.). This formed 24.1% of our full-year projection.

Rental reversions for renewal leases in Singapore were mixed in 1QFY19, coming in negative for Flatted Factories (-5.2%) and Business Park Buildings (-3.0%), but positive for Hi-Tech Buildings (+1.6%) and Stack-Up/RampUp Buildings (+0.7%).

MIT’s balance sheet remains healthy, with an aggregate leverage ratio of 35.0% (+1.9 ppt QoQ), with 77.9% of its total debt fixed. It has also hedged ~81% of its estimated FY19 net USD income streams into SGD.

We will provide more updates on MIT after the analyst conference call. For now we have a HOLD rating and S$2.06 fair value estimate.

Source: OCBC Research - 25 Jul 2018