• Mapletree Industrial Trust's 4Q/FY19 DPU of 3.08/12.16 Scts was in line at 26%/101% of our/consensus FY19 estimates due to contributions from newly added properties in FY19.
• Gearing lowered to a reasonable 33.8% after private placement, leading to the suspension of the DRP scheme.
• Maintain ADD with a higher Target Price of S$2.17.

4QFY19 Results in Line and Higher Y-o-y Due to New Assets

• MAPLETREE INDUSTRIAL TRUST (SGX:ME8U)'s 4QFY19 DPU of 3.08 Scts (+4.4% y-o-y) was in line, forming 26% of our/consensus FY19 estimates; this was due to contributions from development projects and acquisitions. This was offset by higher borrowing costs to fund the acquisition of 18 Tai Seng and the development of Mapletree Sunview 1.
• Full-year FY19 DPU of 12.16 Scts was also in line, forming 101% of our/Bloomberg estimates.

Improved Occupancy With Higher Gross Rental Rate

• Portfolio occupancy improved to 90.2% (88.2% in 3QFY19) mainly due to the hi-tech segment in Singapore. Singapore portfolio occupancy was up at 89.8% (87.7% in 3QFY19) while the US portfolio occupancy was unchanged at 97.4%.
• Gross rental rate improved to S$2.07 psf pm (S$2.04 psf pm in 3QFY19); this was mainly attributed to filling up 30A Kallang Place.

Looking to Expand Presence in Data Centres

• Management continued to express its openness towards data centres (DC) and did not rule out further acquisitions or build-to-suit developments.
• We think that the remaining 60% stake in its 14 US DCs from its Sponsor could be a natural extension to its DC exposure; this could be worth more than its proportionate US$450m (c.US$300m for the initial 40% stake) given the slight cap rate compression in US DCs.

Gearing Lowered to 33.8% Due to Placement But Offset by New Notes

• The gross proceeds of S$201m from its private placement in Feb 2019 helped to lower 4QFY19 gearing to 33.8% (34.7% in 3QFY19), even after including the S$125m 10-year fixed rate notes issued at 3.58% in Mar 2019. This lengthened the weighted average debt tenor to 4.4 years (3.1 years in 3QFY19) but also increased borrowing costs to 3.0%.
• After the distribution in 4QFY19, the Distribution Reinvestment Plan (DRP) will be suspended as the management feels that its current gearing is reasonable and there are no anticipated uses for DRP proceeds.

Maintain ADD With a DDM-based Target Price of S$2.17

• We tweak our assumptions to account for the full-year results and also adjust our risk-free rate and terminal growth assumptions downward, to 2.42% and 2.20% respectively, to account for the more dovish interest rate outlook.
• We continue to like Mapletree Industrial Trust due to its visible growth profile from acquisitions and redevelopments.
• Downside risks include slower recovery in industrial rents and large tenant exits.

Source: CGS-CIMB Research - 23 Apr 2019