Lower DPU but positive rental reversions for Mapletree Industrial Trust leave analysts mixed

Analysts are divided in their outlook for Mapletree Industrial Trust (MINT) following the release of its 1QFY2024 financial results which ended on June 30. DPU slipped 2.9% y-o-y to 3.39 cents, but had a 1.8% q-o-q increase. This is in line with OCBC Investment Research (OIR), DBS Group Research and CGS-CIMB Research, who have kept their “add” and “buy” calls. Only Maybank Securities, which noted MINT’s stable DPU, has kept its “hold” call.

Gross revenue and net property income (NPI) stood at $170.6 million and $130.8 million respectively, representing a 1.7% and 0.7% increase y-o-y. A 100 bps increase in base interest rates was expected to negatively impact MINT’s pro forma 1QFY2024 DPU by -1.4%.

The most optimistic opinion belongs to the research team at OIR, who increased their target price from $2.77 to $2.78. They appreciate MINT’s sizable portfolio of industrial assets in Singapore and successful data centres portfolio in the US and Canada as a proxy to the ever-growing digitalisation and data outsourcing trends.

Rental reversions were positive despite occupancy rate being under pressure. MINT’s overall portfolio weighted average rental reversions stood at 5.3%, with Singapore average rental rate at $2.18 per square foot (psf) per month and US$2.41 ($3.20) psf per month for North America.

The 1QFY2024 portfolio occupancy rate decreased 1.6 percentage points (ppt) q-o-q to 93.3%, with Singapore (-1.7 ppt q-o-q to 93.7%) and North America (-1.3 ppt q-o-q to 92.4%) contributing to the fall. MINT’s management perceive some of these vacancies as transitory.

The OIR team’s new calculation takes into account the proposed acquisition of a data centre in Osaka for JPY52 billion ($507.9 million), making their fair value estimate inch up to $2.78.

CGS-CIMB holds on to their unchanged target price of $2.61, praising MINT’s healthy balance sheet and exposure to new economy sectors. The Osaka acquisition is expected to increase MINT’s exposure to data centres to 56.3% of FY2023 assets under management (AUM).

DBS analysts have lowered their target price from $2.70 to $2.60, but kept their “buy” call. The DPU estimates were tweaked slightly to reflect operating trends.

Maybank Securities, however, are still “holding” their unchanged target price of $2.30. Krishna Guha notes that while MINT’s dividend yield of 5.7% is attractive, there are near term risk factors to account for such as the expiry of the AT&T lease, which contributes to about 5.3% of gross rental income as of June 2023.

Zion Road Condo is a highly sought-after residence for potential homeowners due to its accessibility and convenience. It’s just minutes away from the Hibiscus Shopping Mall, Clementi Town Centre and Holland Village, providing hassle-free access to all their essential amenities. Furthermore, it’s also a short drive away from premier educational institutions such as National University of Singapore, Singapore Polytechnic and United World College.

As of 11.55am, shares in Mapletree Industrial Trust are trading 3 cents lower or 1.32% down at $2.24.