Mapletree Industrial Trust (MIT)

Mapletree Industrial Trust (MIT): Deutsche initiates at Buy with TP $1.30 based on DDM. Likes the Reit bcs of:
- strong organic growth profile, the highest among industrial REITs
- potential further gains from AEIs and selective developments
- high chance in acquiring the JTC portfolio in the upcoming tender.

Estimates 5.5% CAGR for DPU from FY11-14E to be amongst the highest for its peers, on upward rental reversions due to combination of expiry of rental caps at end of Jun ‘11 and short lease expiry profile (WALE of 2.6yrs). Says, along with high retention rates of 85.9% and declining pool of lower cost alternatives, this should allow MIT to close the rental gap with the market and to do so quickly...

Adds, MIT has low concentration risk as only 20.5% of its gross revenue is contributed by its Top 10 tenants. Notes high correlation between GDP growth and demand for industrial space, hence supporting the positive outlook for the sector...

Separately, notes MIT stands a good chance in securing 1 of 2 tranches of JTC’s flatted factories currently being divested. The 2 tranches are valued at $600-650m in total, and could provide ~1% accretion to FY13E DPU.
Highlights MIT’s gearing stands at 36%, and if acquisition is fully debt funded, gearing will rise to 43.5%. Expects a placement to accompany the acquisition to maintain gearing at 36-38%...

Forecasts FY11/12/13 DPU at 8.1/8.6/9.0cts which implies a yield of 6.9/7.3/7.7% respectively.
Stock currently trades at 1.23X P/NAV.
Recent new ratings by UOBKH and JPM are also positive with TP $1.35 and $1.30 respectively.