- 4Q15 beat marginally. BTS-Equinix contributed earlier than expected. FY3/16-18 DPU raised by up to 3.3%.
- Two BTS projects to drive DPU, compensating supply risks. Reiterate BUY. Attractive 7.7% FY3/18 yields. Raise DDM TP to SGD1.77 from SGD1.74.
Slightly better than expected
MIT reported a 5.6% and 4.9% YoY rise in quarterly and full-year revenue to SGD79.4m and SGD313.9m respectively, while respective NPI rose 8.4% and 6.5% to SGD57.8m and SGD228.6m. DPU for the year was 10.4 SGD cts, up 5.1%, exactly our forecast. However, core occupancy fell to 90.2%, its third straight quarter of decline. This underscored oversupply/weak demand in the industrial space. Interest cost rose 10bps to 2.3%, mainly from 13% of loans as variable pegged to the SOR. Gearing was down to 30.6% from 32.8% on property revaluation gains of SGD197m.
BTS projects phase in earlier than expected
BTS-Equinix attained TOP much earlier than expected and contributed a month of revenue. We therefore look forward to full year contribution in FY3/16. BTS-Hewlett Packard Phase 1 should also be completed by end-2016 and Phase 2, by mid-2017. MIT’s BTS projects are pre-committed buildings with long leases and annual rental step-ups.
Reiterate BUY
While we remain Underweight on industrial SREITs due to strong supply and a weak economy, MIT remains a BUY as it phases in its BTS earnings. This should more than offset vacancy risks and provide DPU growth visibility. Fully operational, we expect both projects to contribute SGD38m or 10.3% to revenue by FY3/18. Maintain BUY with TP raised from SGD 1.74 to SGD 1.77 (DDM, CoE 8.5%, LTG 2%) after raising our FY3/16-18 DPU by up to 3.3%.
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