MIT – CIMB

No major surprises

We believe MINT’s current P/BV of 1.4x has priced in its growth potential, particularly as passing rents of its under-rented portfolio catches up with the market and on likely increasing resistance from tenants amid external demand headwinds and cost pressures.

2Q/1HFY13 DPUs broadly met our and consensus expectations, at 26/53% of our FY13 estimates. We nudge DPUs marginally higher on margin adjustments and raise our DDM-based target price after lowering our discount rate to 7.3% from 8.1% previously. Maintain Neutral.

No major surprises

The portfolio remained resilient. 2QFY13 DPU was up 12% yoy on contributions from acquisitions, positive rental reversions and margin improvement. Qoq, DPU was flat (+1%). Positives came from the marginally stronger portfolio occupancy of 95.0% (1Q: 94.9%). Rental reversions remained fairly strong: flatted factories at +23%; business parks at +8%; stack-up/ ramp-up at 20.7%; and warehouse at +19%. Some concerns could come from the fairly slow take-ups at its BTS/AEIs as pre-commitments remain fairly unchanged from 1Q, though more take-ups could flow through nearer to completion. Warehouse occupancy had also dipped to 73% from 90% in 1Q.

Stronger capital management

Asset leverage is at 37.2% as at end-2Q, or 39-40% considering developments and AEIs. In 2Q, MINT issued a S$45m 10-year fixed rate note which successfully lengthened average debt tenure to 3.2 yrs from 2.7 yrs. Yet, cost of borrowing fell from 2.5% to 2.3%, due partly to the replacement of expiring interest rate swaps with lower cost ones.

Maintain Neutral

Notwithstanding the resilient portfolio, we believe the current P/BV of 1.4x (among the highest in the sector) has likely priced in growth potential, particularly as passing rents of its under-rented portfolio catches up with the market, and on likely increasing resistance from tenants amid external demand headwinds and cost pressures.