MIT – DBSV

Pushing ahead

• 1Q13 results stellar at 2.26 Scts

• Resilient portfolio; reversions and retention rates remain at healthy levels

• Forward yields of 7.1-7.4% attractive; BUY with higher TP of S$1.35

Highlights

1Q13 DPU of 2.26Scts in line. Mapletree Industrial Trust (“MINT”) reported gross revenue and net property income of S$66.9m and S$48.3m, which were higher by 22% and 26% y-o-y respectively. The stronger performance was largely attributed to contribution from its newly acquired JTC portfolio of 8 flatted-factories and 3 Amenity Centers (accounting for 60% of the S$11.9m y-o-y topline growth). Excluding new acquisitions, MINT posted strong organic performance, with its portfolio achieving higher rental and occupancy rates. As a result, distributable income came in 25% higher at S$36.9m, translating to a DPU of 2.26 Scts, forming c.27% of our full year forecasts. On a sequential basis, performance was relatively stable, with a slight improvement in new property income margins due to lower maintenance expenses in 1Q12; we estimate margins to normalise back to c.70% level in the coming quarters.

Our View

Resilient portfolio, healthy reversions. The performance of MINT’s diversified portfolio of industrial properties was resilient, achieving higher average occupancies q-o-q of 94.9% in 1Q13, stable qoq, with portfolio seeing healthy retention rates of 71.1%. Portfolio average rentals inched up higher to S$1.56 psf/mth with new leases and renewals averaging hikes of c9.3-31.7%. Amongst the subsectors, the flatted factories space is the most stable – with new leases/renewals ranging between 5-21% above passing levels, ahead of our forecasts. As such, we tweak our earnings estimates slightly to account for higher reversions in FY13/14.

Manager expects stable operations. Looking ahead, MINT’s operational performance should be relatively stable, given a portfolio where occupancies are almost full while having only 13% of topline that is up for renewal over the rest of FY13. This limits downside risks in our view. The manager continues to improve portfolio WALE (currently at 2.6 years) and income certainty for the REIT through offering tenants longer-term leases with staggered rental escalations which we understand have seen good take-ups.

Recommendation

BUY call maintained, TP raised to S$1.35. MINT continues to offer attractive forward yields of 7.1-7.4%, supported by a diversified portfolio and strong sponsor backing. TP of S$1.35 offers total return of 16%.