MIT – DBSV

What a coup !

• New built-to suit facility contract at S$250m to yield myriad of positives for portfolio
  
• Gearing to edge higher to c. 41% in medium term
  
• Maintain BUY, TP raised to S$1.50
  

New built-to-suit (BTS) facility for HP at S$250m.

MINT announced that it has secured a contract to develop a new BTS facility for Hewlett Packard for a total consideration of S$250m. Upon completion in FY18, HP will sign a long term lease of 10.5 years, with two 5-year extension options, providing strong income visibility for MINT.

Positive in many aspects. The proposed development is estimated to yield 9.0% on total cost and is positive for MINT in many ways. Upon completion in FY18F, MINT will benefit from (i) higher property specifications with the property repositioned as a hi-tech property, (ii) higher revenues through maximising unutilized plot ratio (1.3x to 2.5x) resulting in c. 89% increase in GFA, (iii) stronger income visibility through a longer WALE backed by a strong tenant. To facilitate the relocation of existing tenants, the Manager will offer attractive packages, with the aim to move affected tenants to other clusters within its portfolio.

Financial capacity to undertake development. At c. 9% NPI yield, this development project is expected to be yield enhancing to earnings upon completion. Gearing is estimated to hit c. 41% upon completion. Given the phased investment, we believe there is no urging need to raise new equity.

Maintain BUY. We believe that the positives from this deal will far outweigh the limited impact on earnings in the immediate term. Maintain BUY, TP raised to S$1.50.