MAPLETREE INDUSTRIAL TRUST
ME8U.SI
Mapletree Industrial Trust - Fairly priced
- Revised estimates to account for higher and earlier-than-projected contribution for HP building.
- Stock trading near record highs; positives priced in.
- Upside to earnings will come from acquisitions or development projects.
Positives price in.
- We maintain our HOLD call for Mapletree Industrial Trust (MINT) on valuation grounds.
- We see MINT’s resilience as a value trait in this market and this has been reflected in its current share price.
- Our TP is raised to S$1.81 on the back of roll-forward valuations and raising our estimates from the built-to-suit project for Hewlett-Packard (HP).
Development projects to drive upside from FY18F onwards.
- MINT will only reap the benefits from the completion of development projects from 2HFY18F onwards (built-to-suit project for HP and a new hi-tech building at Kallang Basin 4 cluster).
- At a total estimated cost of c.S$250m, we estimate returns of c.8.5% which would result in a rebound in DPU growth in the medium term. Eventual gearing will still remain at a conservative c.31%.
Low gearing a positive.
- MINT has a low gearing of c.25%, which makes it one of the lowest geared industrial REITs, offering the Manager significant debt-funded capacity for acquisitions or to undertake development by taking part in built-to-suit projects (BTS) or asset enhancement initiatives.
- We have not priced in any further acquisitions or developments (apart from those that have been announced) in our numbers.
Valuation:
- We see MINT’s resilience as a value trait in this market and this has been reflected in its current share price.
- We maintain our HOLD recommendation with roll-forward TP of S$1.81.
Key Risks to Our View:
- Rising interest rates An increase in refinancing rates will negatively impact distributions. However, we note that MINT has minimised these risks by having c.88% of its interest cost hedged into fixed rates.
Derek Tan
DBS Vickers
|
Mervin Song CFA
DBS Vickers
|
http://www.dbsvickers.com/
2016-07-13
DBS Vickers
SGX Stock
Analyst Report
1.81
Up
1.64
