MIT – DBSV

Resilient portfolio; healthy reversions

At a Glance

• 2Q12 DPU of 2.05 Scts in line (1H12 forms 51% of our FY12 estimates)

• Resilient portfolio; healthy reversions

• BUY maintained, TP revised to S$1.28 based on DCF

Comment on Results

2Q12 DPU of 2.05 Scts in line. Mapletree Industrial Trust (“MINT”) reported gross revenue and net property income of S$59.0m and S$41.1m respectively, 11% and 13% higher than IPO forecasts but in line with our estimates. The stronger performance was largely attributed to the contribution from its newly acquired JTC portfolio of 8 flatted-factories and 3 Amenity Centers. The new portfolio contributed c4.2% of gross revenues for the quarter. Excluding new acquisitions, MINT showed strong organic performance with its portfolio achieving higher rental and occupancy rates. As a result, distributable income was above IPO forecasts by 17%; translating to a DPU of 2.05 Scts. 1H12 results formed 51% of our FY12 estimates.

Resilient portfolio; healthy reversions. MINT’s diversified portfolio of industrial properties remained resilient achieving higher average occupancies 94.5% in 2Q12 ( vs 94.3% in 1Q12) and slightly higher portfolio average rental of S$1.54 psf/mth. After the coming off of its rental caps, average gap between renewals and new leases have narrowed and remained 10-40% higher than passing rents. Retention rates remained healthy at 79.4%. Looking ahead, performance should be relatively stable given that only c8.2% of topline is up for renewal over the rest of FY12. To improve portfolio WALE (currently at 2.7 years) and income certainty for the REIT, the manager looks to offer tenants longer-term leases with staggered rental escalations.

Healthy financial metrics . Balance sheet remains strong, with a gearing of 39.2% and an interest coverage ratio of over 6.4x. Its weighted average debt tenor remains 2.7 years with evenly spaced out maturities over the next 5 years.

Recommendation

BUY call maintained. Forward yields of 6.9-7.4% remain attractive in our view, given a diversified portfolio and strong sponsor backing. TP of S$1.28 offers total return of 18%.