MIT – CIMB

Decent 3Q performance

MINT bucked trends of slower economic growth and delivered steady rental reversions and occupancy gains in 3Q. However, we think positives are priced in, particularly with a pure-local mandate and lack of pipeline assets likely to hinder meaningful acquisition growth.

3Q/9MFY13 DPUs were slightly above our and street expectations on stronger margins, forming 26/77% of our FY13 forecast. We tweak DPUs higher on stronger margin assumptions, but keep our DDM-based target price (discount rate: 7.5%) of S$1.50 unchanged. We maintain our Neutral rating.

Steady quarter

3QFY13 DPU was up 7% yoy on contributions from acquisitions, positive rental reversions and margin improvement. DPU rose 1% qoq. Positives came from the marginally stronger portfolio occupancy of 95.2% (2Q: 95.0%), while rental reversions remained fairly strong – flatted factories at +24%; business parks at +8%; stack-up/ramp-up at +18%. Also management announced a new AEI (estimated capex of S$4m-5m) at its business park property, The Signature to enhance common areas and competitiveness of the asset.

Capital management

Asset leverage remains a healthy 37.1%, with all FY13 loans refinanced. As part of proactive capital management efforts, management will also introduce the distribution re-investment plan (DRP) for 3QFY13. We are positive on the financial flexibility offered by the programme (proceeds could be channelled toward funding needs of small AEIs such as the one at The Signature), but remain cautious of impact from potential dilution.

Maintain Neutral

The key draw of MINT’s portfolio, we believe, lies in its bond-like income stream, its pure local exposure and positive rental reversions. But we see positives priced in at 1.4x P/BV, particularly with a pure-local mandate and lack of pipeline assets likely to hinder meaningful acquisition growth, till MINT looks at expanding overseas with the expiry of its pure-local mandate in Oct 2013.