MIT – CIMB

Eyes on The Signature

We expect positive rental reversions at MINT’s flatted factories to mitigate downside at The Signature. Though headline yields are decent in the current climate of compressed yields, we maintain a Neutral rating pending clarity on backfilling and further growth catalysts.

4Q/FY13 DPUs were slightly above street and our expectations, forming 26/102% of our FY13 forecast. The variance was due to higher short-term business park rents. We raise DPU estimates and our DDM-based target price (discount rate: 7.3%) factoring in stronger rental assumptions and its recent BTS development.

All eyes on The Signature

We expect positive rental reversions on MINT’s flatted factory assets and asset enhancements to mitigate vacancy with its departing business-park tenants. 4QFY13 DPU was up 7% yoy, thanks to higher rents on a six-month lease extension by Credit Suisse at The Signature and positive rental reversions, offset partially by higher maintenance operating expense within its flatted factories. Qoq, DPU was up 2%.

The portfolio remains healthy pending the departure of major tenants at The Signature. Portfolio occupancy was at 95.4% (3Q: 95.2%), while rental reversions appeared stronger: flatted factories (+30%), business parks (+13%) and stack-up/ ramp-ups (+36%). This year, all eyes will be on The Signature, from which major tenants such as Credit Suisse and Lucas Films are departing. While there has been no formal lease take-ups, management is in advanced negotiations with several prospects.

Lower asset leverage

Asset leverage has been lowered to 35%, thanks to revaluation gains of 5% on the back of higher NPI and occupancy as cap rates remained stable. This should leave it sufficient debt headroom to fund its past AEIs and recently-announced data-centre BTS development.

Maintain Neutral

We expect positive rental reversions at MINT’s flatted factories to help mitigate downside at The Signature. Headline yields are decent in the current climate, but we maintain Neutral pending clarity on backfilling and further growth catalysts.