• 2QFY20 DPU rose 4.0% YoY
• Only Hi-Tech space saw positive rental reversions
• Unchanged S$2.55 fair value

2QFY20 Results In-line With Our Expectations

Mapletree Industrial Trust (MIT) reported its 2QFY20 results which met our expectations. Gross revenue and NPI saw an improvement of 10.5% and 13.3% to S$101.9m and S$80.0m. This was driven by new revenue contributions from its Hi-Tech Buildings which includes 18 Tai Seng, 30A Kallang Place and Mapletree Sunview 1.

NPI for this segment jumped 39.9% YoY to S$32.9m, and this constituted 41.2% of MIT’s overall portfolio NPI. The Hi-Tech Buildings segment also carries the highest NPI margin within MIT’s portfolio, at 82.9% in 2QFY20. DPU for the quarter rose 4.0% YoY to 3.13 S cents. For 1HFY20, MIT’s gross revenue rose 9.7% to S$201.4m; NPI increased 12.8% to S$157.9m; while DPU climbed 3.7% to 6.23 S cents and formed 49.6% of our FY20 forecast.

Rental Reversions Still Soft, as Previously Guided

Operationally, rental reversions for MIT’s renewal leases remained subdued in 2QFY20, but this was well guided by management during the previous quarter. Conditions may improve in 3QFY20, although uncertainties will continue to linger. Only the Hi-Tech Buildings space saw positive rental reversions (+2.6%) in 2QFY20, while Business Park Buildings fared the worst (-9.2%) as MIT is still trying to backfill the space vacated by some of its larger tenants which left previously.

For the Flatted Factories and Stack-Up/Ramp-Up Buildings, rental reversions were -2.2% and -0.7%, respectively. Portfolio occupancy in Singapore saw a slight decline of 0.3 ppt QoQ to 90.2%, due largely to a dip in Light Industrial Buildings (-10.3 ppt).

Paring Down Debt First With Private Placement Proceeds

In terms of financial position, MIT’s aggregate leverage declined from 33.4% (end-1QFY20) to 29.2%, as management utilised a portion of its recent private placement proceeds to pare down some debt first. Once MIT completes the proposed acquisition of a portfolio of 13 data centres in North America (JV with its sponsor), its aggregate leverage is expected to increase to 37-38%. After some minor tweaks, our fair value remains at S$2.55.

Source: OCBC Research - 23 Oct 2019