MIT – DBSV

Diversification is key

• 4Q12 DPU of 2.22 Scts slightly ahead, full year DPU of 8.4 Scts is 6% above our forecasts

• Rental growth profile expected to moderate

• Maintain BUY; TP raised to S$1.30

Highlights

4Q12 DPU of 2.22 Scts slightly ahead of estimates. Mapletree Industrial Trust (MINT) reported gross revenue and net property income of S$66.3m and S$46m respectively, representing 20.8% and 23.4% growth above forecasts. The stronger performance was largely attributed to the contribution from its newly acquired JTC portfolio of eight flatted-factories and three Amenity Centers, supported by portfolio wide positive rental reversions. The new portfolio contributed c.63% of topline growth this quarter. As a result, distributable income of S$35.8m was 28% above forecasts, translating to a DPU of 2.22 Scts.

Positive revaluations of S$94m. NAV was lifted to S$1.03 (from S$0.95), due to stronger occupancies and rental income achieved. Gearing headed slightly lower to 37.8%.

Resilient portfolio, healthy reversions. MINT’s diversified portfolio of industrial properties continued to exhibit resilience, achieving reversions of between 15% and 29%. Occupancies were stable at 94.9% in 4Q12 (vs 95.1% in 3Q12) and the average portfolio rental at S$1.55 psf/mth was slightly higher. Retention rates remained healthy at 76.1%.

Our View

Stable performance expected; renewal gap should narrow in our view. Looking ahead, we believe performance will remain relatively stable with portfolio near full occupancy. The manager’s strategy to lengthen its WALE has met with good response, with tenants offered leases with longer tenures. While there will be organic growth from expiring rents in view of the positive spread between passing and market rents, we expect the pace of growth to moderate given the uncertain operating environment with end tenants facing cost pressures on all front.

Recommendation

Maintain BUY, TP S$1.30. Our numbers are adjusted slightly higher to account for higher occupancy and lower than expected interest costs. Our TP of is raised to S$1.30 as we roll forward our valuations to FY13. Maintain BUY.