Mapletree Industrial Trust

Mapletree Industrial Trust’s 3QFY16 results were in line. DPU rose 5.6% to 2.82¢, while distributable income climbed 9.5% to $50.3m.

Revenue expanded 6.6% to $83.3m, while NPI grew 6.7% to $61.9m, contributed by the build-to-suit (BTS) project for Equinix, increased portfolio occupancy, and higher rental rates for flatted factories, stack-up/ramp-up buildings and light industrial buildings.

Occupancy inched 0.9ppt q/q to 94.7%, with WALE of 2.9 years. Portfolio passing rental rate was $1.89psf/mth, from $1.88 last quarter. Tenant retention remained healthy at 84.2%.

Aggregate leverage stood at 29.3% (-0.4ppt q/q), with weighted all-in funding cost of 2.4% (+10bps q/q).

On development updates, the BTS for Hewlett Packard remains on track with Phase 1 to be completed in 2H16, although the AEI at Kallang Basin 4 cluster is delayed by a quarter to 1Q18.

Maybank-KE opines this a set of commendable results amid a difficult environment, and likes MINT for being one of the few S-REITs that has clear growth visibility. The house expects the HP BTS and a new high-spec building at Kallang Basin 4 to support DPU growth of 10% in FY3/18, translating to an effective yield of 8% in the longer term. As a result of taking on more debt to fund these projects, the house expects aggregate leverage to climb to 32%. Beyond that, MINT still has $450m of debt headroom before leverage hits 40%.

Nevertheless, the house maintains Hold on MINT with TP of $1.50 given still-difficult operating environment.