MIT – CIMB

A bright outlook

Our FY3/14 DPU forecast was almost spot on as MIT raised its 4Q DPU by 7.2% yoy on the back of 4.2% revenue growth. We expect the recently announced S$250m BTS project, the largest BTS project undertaken by MIT to contribute to the next stage of growth. In light of the room for growth, we maintain our Add rating on MIT, with an unchanged DDM-based (discount rate: 8.1%) target price of S$1.64.

Positive rental reversion continues

Mapletree Industrial Trust (MIT) reported a 4QFY14 revenue of S$75.2m (+4.2% yoy) and DPU of 2.51 Scts (+7.2% yoy), mainly driven by rental revenue growth (ranging between 9.4% and 21.6%) for all property segments and rising occupancy of the flatted factories. The average portfolio occupancy eased from 92.5% in 3QFY14 to 91.3% in 4QFY14, partly due to higher leasable space following the completion of AEI at Toa Payoh North 1 Cluster.

Clear outlook

MIT recently announced its largest BTS to date, a S$250m project for Hewlett-Packard (HP) Singapore. On completion in 1H17, the project is expected to boost DPU by c.9.7%, bringing about the next stage of growth for MIT. In the nearer term, with 22.5% of leases up for renewal in FY14-15, mainly concentrated in the flatted factories (c.14.8%), we expect MIT to continue to achieve positive rental reversion as these leases are estimated to be c.20-25% below the average spot rent. In addition, with the built-to-suit (BTS) Equinix project scheduled to be completed in 2HCY14, coupled with the recently completed AEI at Toa Payoh North 1, we expect MIT’s outlook to remain positive. We forecast FY15 DPU to rise by c.1.5% as the bright outlook is partially offset by the higher interest payment for the BTS project.

Maintain Add

With c.29% of total debt due in FY14-15 to be refinanced, we are confident that MIT’s management will continue to take advantage of the current cheap lending environment and refinance these debts before they are due. On the back of further room to grow both organically and inorganically, we maintain our Add rating with an unchanged target price of S$1.64.