MAPLETREE INDUSTRIAL TRUST (SGX:ME8U)’s 3Q20 DPU of SGD3.16cts, up 2.9% y-o-y, was ahead of ours and consensus estimates with 9M20 DPU at 77% of our full-year, backed by rising hi-tech contributions.
We continue to like its positive growth fundamentals, with its DPUs supported by recovering leasing demand in Singapore and growth visibility from a more resilient portfolio following its hi-tech asset investments and overseas diversification. This, together with a stronger balance sheet post a recent SGD400m placement, should support further DPU-accretive deals.
Mapletree Industrial Trust’s valuation has been driven by strong execution and growth momentum on expanding its hi-tech mix (now at 49.3% of AUM), and we see upside from its sponsored US data centre assets in the near-term.
We raised FY20-21 DPUs by 2%, while our DDM-based Target Price rises to $2.95 (COE: 6.4%, LTG: 1.5%, see Mapletree Industrial Trust Target Price). BUY.
SG Occupancies Up, Led by Hi-tech, Business Parks
Mapletree Industrial Trust's revenue rose 9.7% y-o-y in 3Q20 while NPI jumped 14.0% y-o-y. Key drivers were new contributions from
18 Tai Seng from Feb 2019,
7 Tai Seng Drive on a 25-year lease to Equinix, and
better performance at 30A Kallang Place post-redevelopment.
Its portfolio occupancy improved from 90.5% to 90.7% as Singapore occupancies increased from 90.2% to 90.5% due to its high-tech buildings (96.9% to 98.4%) and business park buildings (81.9% to 85.1%). Mapletree Industrial Trust's US portfolio occupancy rose from 97.4% to 97.8% with the contribution of its US turnkey portfolio (100% occupied).
Rents Have Likely Bottomed Out in SG
Rental reversions were positive for its hi-tech buildings (+1.4% y-o-y), business park buildings (+0.2%), and stack-up/ramp-up (+1.6%), but this was weaker for flatted factories (-1.1%).
WALE increased from 3.6 to 3.9 years with the addition of the US turnkey portfolio at 7.8 years as of end-Dec 2019. 62 of its 108 existing tenants at Kolam Ayer 2 Cluster (to be redeveloped into a new high-tech industrial precinct from 2H 2020) have committed to leases at its other properties.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....