Mapletree Industrial Trust: HSBC initiates coverage with Neutral Rating and $1.20 TP, citing positive rental reversions and increases in occupancies as key drivers. Estimate that MIT’s portfolio average passing rent is 20% below current market rents. With a short WALE of 2.6 yrs. MIT is poised to achieve positive rental reversions in the near term as leases expire.
Positive outlook for the industrial sector supports MIT’s organic growth prospects, with Flatted factories and business parks making up 60% and 20% of MIT’s estimated GAV. Expect broad-based rental growth across the industrial sector, with factory rental growth underpinned by high occupancies and business park rents moving higher, in line with fringe office rent growth.
Recent JTC acquisition seems slightly expensive; post-acquisition gearing levels close to 40%, constraining future acquisitions. Growth prospects largely priced in. Conclude that current valuations largely reflect MIT’s growth prospects and prefer Ascendas REIT within the SG industrial sector for its lower gearing and less demanding valuations. FY11E yields are attractive at 7.4%, while grp trades at 1.2x P/RNAV.