Adding Growth From US Data Centres

• Mapletree Industrial Trust (SGX:ME8U) delivered a strong 1Q22, as DPU rose 16.7% y-o-y/ 1.5% q-o-q (from a 13% larger unit base on the back of the recent S$823.3m EFR) with the consolidation of its 14 US data centre portfolio, contribution from 8011 Villa Park Drive, and absence of rent reliefs.
• Occupancy in Singapore has improved, even as rental recovery remains uneven.
• We raised Mapletree Industrial Trust's DPUs forecast by 3- 4% with the completion its recent US portfolio acquisition, and see further DPU-accretive deals, as management advances diversification efforts to deepen data centre concentration to 50-67% of AUM.
• Our DDM-based target price for Mapletree Industrial Trust (COE: 5.9%, LTG: 2.0%) rises to S$3.35. BUY.

Singapore Occupancy, Rents Up Q-o-q

• Mapletree Industrial Trust's portfolio occupancy increased q-o-q from 93.7% to 94.3%, mainly due to the better performance of its Singapore assets (from 92.9% to 93.4%), that was underpinned by improvements for its high-tech buildings, flatted factories and stack-up/ ramp-up property.
• Leasing remains competitive for its older business park assets, and tenant expansion at Synergy was on a 10-year term at lower rents. Gross rent rose 2.4% y-o-y and 3.9% q-o-q, (from -2.8% q-o-q in 4Q21) with absence of rental relief that was provided in 1Q21, and management expect these to bottom out over the next 6-9 months.

US Acquisition Adds 3.5% to DPU

• Its US$1.32b portfolio acquisition of 29 US data centres was completed on 22 properties jump from ~56% to ~66% of AUM (by NLA).

Data Centre AUM to Rise Further

• Mapletree Industrial Trust's gearing fell to 31.0% (from 40.3%) but should rise to ~39% in 2Q22 on the back of the ~25% jump in its AUM.
• Mapletree Industrial Trust's balance sheet remains markets and EFR opportunities.

Source: Maybank Kim Eng Research - 28 Jul 2021