In Line, Fine-tuning DPUs; Maintain BUY

• We fine-tune DPUs following in-line 4Q19 DPU of SGD3.08cts, up 4.4% y-o-y on better portfolio occupancies and rising hi-tech contributions. MAPLETREE INDUSTRIAL TRUST (SGX:ME8U)'s FY19 DPU achieved 98.3% of our FY19 forecast.
• Looking ahead, we see DPUs backed by recovering leasing demand and growth visibility from a more resilient portfolio following its hi-tech asset investments and US diversification. We also introduce FY22 estimates. Our DDM-based Target Price stays at SGD2.25 (COE: 7.2%, LTG: 1.5%), and implies 14% total return.
• We continue to see catalysts from its acquisition-growth potential given a low 33.8% gearing and SGD0.7-1.2b of debt headroom. BUY.

Rising High-tech Contributions

• Mapletree Industrial Trust's 4Q19 revenue and NPI rose y-o-y and q-o-q on the back of contributions from its:
  1. HP build-to-suit (BTS) Phase 2 property;
  2. 18 Tai Seng acquisition completed on 1 Feb 2019;
  3. Sunview 1 BTS data centre; and
  4. 30A Kallang Place post-redevelopment.
• Portfolio occupancy rose from 88.2% to 90.2% as Singapore occupancy increased from 87.7% to 89.8%. All segments reported higher occupancies except for business-park buildings, down from 81.5% to 79.4%, as demand for its older properties remained soft. Meanwhile its US occupancy was unchanged at 97.4%, as management flagged strong demand for data-centre space.
• Mapletree Industrial Trust's AUM rose 10.4% y-o-y to SGD4.8b as of end-Mar 2019, supported by revaluation gains in Singapore but mostly from the inclusion of 18 Tai Seng and 7 Tai Seng Drive. High-tech properties, now at 43.3% of AUM, up from 37.7% in FY18, look set to benefit from stronger demand.

Strong Balance Sheet, DRP Suspended

• A SGD201.0m private placement completed on 11 Feb 2019 reduced Mapletree Industrial Trust's gearing to 33.8% with an estimated SGD0.7-1.2b of debt headroom to the 40-45% limit for further deals. Mapletree Industrial Trust’s balance-sheet strength has been reinforced, with the suspension of its dividend reinvestment plan (DRP) after its 4Q19 distribution.
• Management sees fewer opportunities for AEI or redevelopment and instead eyes DPU growth levers from an expansion of its high-tech and data-centre assets in Singapore and overseas.

Source: Maybank Kim Eng Research - 23 Apr 2019