Mapletree Industrial Trust

DBS Group Research on 25 July 2012


MAPLETREE Industrial Trust reported gross revenue and net property income of $66.9 million and $48.3 million, which were higher by 22 per cent y-o-y and 26 per cent y-o-y, respectively.
The stronger performance was largely attributed to the contribution from its newly acquired JTC portfolio of eight flatted-factories and three Amenity Centers (accounting for 60 per cent of the $11.9 million y-o-y topline growth). Excluding new acquisitions, Mapletree Industrial posted strong organic performance, with its portfolio achieving higher rental and occupancy rates. As a result, distributable income came in 25 per cent higher at $36.9 million, translating into a distribution per unit of 2.26 cents, forming some 27 per cent of our full-year forecasts.


On a sequential basis, performance was relatively stable, with a slight improvement in net property income margins due to lower maintenance expenses in Q1 2012; we estimate margins to normalise back to around the 70 per cent level in the coming quarters.


The performance of Mapletree Industrial's diversified portfolio of industrial properties was resilient, achieving higher average occupancies q-o-q of 94.9 per cent in Q1 2013, stable q-o-q, with its portfolio seeing healthy retention rates of 71.1 per cent. Portfolio average rentals inched up to $1.56 per sq ft per month with new leases and renewals averaging hikes of 9.3-31.7 per cent. Among the sub-sectors, the flatted factories space is the most stable - with new leases / renewals at 5-21 per cent above passing levels, ahead of our forecasts. As such, we tweak our earnings estimates slightly to account for higher reversions in FY2013/14.


Looking ahead, Mapletree Industrial's operational performance should be relatively stable, given a portfolio where occupancies are almost full while having only 13 per cent of topline that is up for renewal over the rest of FY2013. This limits downside risks, in our view. The manager continues to improve the portfolio's weighted average lease term remaining to expire (WALE, currently at 2.6 years) and income certainty for the trust, by offering tenants longer-term leases with staggered rental escalations which we understand have seen good take-ups.


Mapletree Industrial continues to offer attractive forward yields of 7.1-7.4 per cent, supported by a diversified portfolio and strong sponsor backing. We maintain our "buy" call and raise our target price to $1.35 from $1.30, offering a potential total return of 16 per cent.
BUY