MIT – DBSV

Key take-aways from meeting

• Strong operational performance

• Organic growth robust, further upside from acquisitions, asset enhancement works

• Maintain BUY, DCF-based TP raised to S$1.21

Strong operational performance. Mapletree Industrial Trust’s (“MINT”) strong set of 4Q11 results unveiled encouraging datapoints. Firstly, occupancy increased to 93.2% on the back of high retention rate of 86%, indicating a strong underlying demand for industrial space. Secondly, MINT continues to renew c99.1% of leases at the maximum cap (for the non-business parks space in its portfolio) while new leases secured at market rates are in excess of 20% above expiring rents. These highlight that the average portfolio rental rate of S$1.49 psf/pm is not excessive and there is room for further upside once the rental caps affecting c84% of its NLA fall off in Jun’11.

Organic growth remains robust over FY12-13F. We expect MINT to deliver strong organically-driven DPU CAGR of 9% over FY12-13F. As rental caps expire, the manager will re-price rents nearer to market when leases, amounting to c23%/c26% of revenues are renewed over FY12/13. Further earnings growth is likely to come from a myriad of opportunities – (i) with strong take-up for its first initiative at property development in Redhill – a conversion of flatted factory space into e-business use – the manager is looking for more asset enhancement opportunities within its portfolio. Possibilities include similar conversion of vacant space and redevelopment of un-utilized GFAs in certain properties, (ii) 3rd party acquisitions, which the manager is actively pursuing, including JTC’s trade sale of a portfolio of assets.

BUY call maintained, TP raised to S$1.21. MINT currently trades at implied yield of 6.6%, which means that target acquisitions should be accretive when executed. Prospective FY12-13F yields of 7.2-7.7% are attractive given its mid-large cap status and strong sponsor backing.