• Mapletree Industrial Trust's 1QFY22 DPU of S$0.0335 was in line at 26% of our FY3/22F forecast.
• Improved Singapore performance, new acquisitions to boost US income.
• Reiterate ADD on with a higher DDM-based target price of S$3.16.

Mapletree Industrial Trust's 1QFY22 Results Highlights

• Mapletree Industrial Trust (SGX:ME8U) reported a 29.2%/33.1% y-o-y rise in 1QFY3/22 revenue/NPI to S$128m/S$104.7m, respectively, due to the consolidation of 14 US data centres (DC) and Virginia DC as well as absence of rental reliefs. Property expenses rose at a slower pace, resulting in a higher NPI margin of 81.8%. 1Q DPU of 3.35 cents is 16.7% higher y-o-y.

Singapore Portfolio Occupancy Improved Q-o-q

• Portfolio occupancy continued to tick the sale of 26A Ayer Rajah Crescent, Mapletree Industrial Trust intends to distribute the S$15.7m of net divestment gains over eight quarters, from 2QFY3/22.

New Acquisitions to Boost US Contributions in Coming Quarters

• There was a slight improvement in occupancy of the US portfolio to 97.8% at end-1Q. We anticipate US contributions to increase from 2QFY22 with the completion of the acquisition of a portfolio of 29 US data centres in Jul 2021 for US$1.32bn. The purchase was funded through a S$823.3m equity fund raising and debt.
• The data centre portfolio is 87.8% occupied with a long weighted average lease expiry of 7.9 years, and 89.4% of the leases have an inbuilt rental escalation of 1.5-3% p.a. With an estimated post acquisition gearing of 40%, we believe Mapletree Industrial Trust is well-placed to continue to tap into acquisition growth opportunities.
• Meanwhile, the redevelopment of Kolam Ayer Cluster 2 is under way and is scheduled to be completed in 1H23.

Reiterate ADD Rating on Mapletree Industrial Trust

• We tweak our FY22F DPU forecast for Mapletree Industrial Trust slightly to bake in some potential tenant divestment gains. Accordingly, our DDM-based target price for Mapletree Industrial Trust is raised to S$3.16.
• Upside risk: better-than-projected rental reversions.
• Downside risk: protracted recovery a longer recovery period in vacancies and rentals.

Source: CGS-CIMB Research - 28 Jul 2021