Analysts from UOB Kay Hian (UOBKH), CGS International, DBS Group Research and Citi Research have maintained their “add” and “buy” calls on Mapletree Industrial Trust ME8U (MINT), following the REIT’s release of its 2QFY2025 ended Sept 30 results, on Oct 29. Morningstar is less upbeat with a maintained rating of “two stars”.
MINT announced a 2QFY2025 distribution per unit (DPU) of 3.37 cents, 1.5% higher y-o-y while distribution income to unitholders rose by 1.9% y-o-y to $95.8 million. The DPU and distribution income includes divestment gains from Tanglin Halt.
Gross revenue and net property income (NPI) grew by 4.2% and 4.6% to $181.4 million and $134.5 million, respectively.
Of the brokerages, UOBKH, CGSI and Morningstar have kept their target prices at $3.05, $2.82 and $2.30 respectively. DBS has upped its target price to $2.75 from $2.60. Citi has upped its target price to $2.65 from $2.41 in its latest model update dated Nov 4.
DBS’s higher target price is due to MINT’s stronger-than-expected results and its ability to keep overall interest rates under control, note analysts Derek Tan and Dale Lai.
At the same time, Citi’s upgraded target price comes with the REIT’s higher growth rate of 2.5% and 30 basis points (bps) portfolio cap rate compression, says analyst Brandon Lee.
“We continue to like MINT’s resilient portfolio metrics and attractive projected FY2025 forecasted dividend yield of 5.8%,” CGSI analysts Lock Mun Yee and Natalie Ong note.
Meanwhile, DBS’s Tan and Lai “see investors gravitating towards investors gravitating towards MINT especially when overall economic conditions remain uncertain as its diversified portfolio has proven to be able to weather the downturns.”
According to UOBKH analyst Jonathan Koh, this was “driven by the acquisition of a data centre (DC) in Osaka and higher rents for new leases and renewals across various asset types.”
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Portfolio occupancy
MINT’s average portfolio occupancy rate grew 1 percentage point (ppt) q-o-q to 92.9% in 2QFY2025, driven by the commencement of the lease with Vanderbilt University Medical Centre in Tennessee this quarter.
MINT’s Singapore portfolio had a stable occupancy rate of 93.7%, with committed occupancy at Mapletree Hi-Tech Park improving 1 ppt q-o-q to 54.5% in 2QFY2025.
CGSI’s Lock and Ong note that within Singapore, MINT saw an improved take-up at its Singapore DC, light industrial buildings and business parks which offset the decline in occupancy at its flatted factories.
UOBKH’s Koh notes that MINT achieved healthy positive rental reversions in Singapore, with an average rental reversion of 10.7%, and average rental rate of its Singapore portfolio increasing 3.2% y-o-y to $2.26 psf per month (psfpm) in 2QFY2025.
According to Citi’s Lee, this was “helped by expiring leases signed during Covid, with -1.3% in Business Park due to rent-frees given to two tenants and +26.1% attributable to 2A Changi North Street 2 within [MINT’s] light industrial [sector].”
“Going forward, MINT expects mid-single-digit positive rent reversion,” he adds.
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MINT’s gearing
MINT’s gearing remained stable q-o-q at 39.1% at the end of 2QFY2025. UOBKH’s Koh notes that adjusted interest coverage ratio was resilient at 4.3 times, with about 80% of MINT’s borrowings hedged to fixed interest rates.
On Oct 29, MINT announced that it had completed the acquisition of an effective interest of 98.47% in a mixed-use facility in West Tokyo for $129.8 million, comprising a DC, back office and training facilities and an accommodation wing.
According to UOBKH’s Koh, this increases MINT’s exposure to Japan from 5% to 6% of assets under management (AUM).
The property is currently fully leased to an established Japanese conglomerate with a weighted average lease expiry (WALE) of five years, with a NPI yield of 4%.
CGSI’s Lock and Ong expect MINT’s gearing level to rise to around 40%, following the completion of this acquisition.
Furthermore, all-in funding cost stayed stable at 3.2% in 2QFY2025, with 5% of borrowing expected to be refinanced in FY2025 arising from its 50% share of US dollar joint venture (JV) bank loans.
CGSI’s Lock and Ong anticipate that average funding costs will increase further in 2HFY2025.
MINT’s upcoming lease expiries
Looking ahead, MINT has 7.7% and 17.4% of its gross rental income to be reviewed in 2HFY2025 forecasts and FY2026 forecasts, respectively. This is attributed to its US DC segment and Singapore flatted factories.
Furthermore, MINT has secured a 17-month lease extension for the upcoming lease expiring at a property tenanted by AT&T in San Diego.
Morningstar analyst Xavier Lee notes that management expects the rent reversion on this extension to be 20% lower than the previous extension as the trust had to balance retaining the tenant or pricing the tenant out.
Citi’s Lee identifies other major lease expiries in FY2025 as The Vanguard Group’s space in Philadelphia expiring, Centresquare’s space in Phoenix and around 33,000 sq ft of space in Denver.
However, Citi’s Lee notes that “overall, MINT is confident that all its top 10 tenants would renew on five or 10-year lease tenures except for AT&T.”
MINT’s future plans
Moving forward, CGSI’s Lock and Ong add that MINT’s strategy is to strengthen its portfolio through “accretive acquisitions, asset rejuvenation and explore opportunistic divestment opportunities to rebalance its portfolio.”
MINT is looking to increase its exposure to DCs, specifically in the Asia Pacific DC market.
UOBKH’s Koh notes that “MINT intends to diversify into established data centre markets in Asia Pacific and Europe to reduce concentration risk. Management plans to increase scale and deepen its presence in Japan.”
“Data centres in Japan provide positive yield spread and funding in Japanese yen would reduce its cost of debt,” Koh adds.
Following MINT’s recent acquisition of its mixed-use facility in West Tokyo, UOBKH’s Koh is of the opinion that “the property has the potential to be redeveloped into a multi-storey core & shell data centre with capacity for 30 megawatts (MW) to 40MW of IT workload at a cost of $200 million to $300 million.”
Given the stronger-than-anticipated results and MINT’s ability to keep overall interest rates under control, DBS’s Tan and Lai have adjusted their estimates slightly to account for potential interest rate cuts, raising their FY2026 and FY2027 forecasted earnings by 2% to 3%.
Citi analyst Brandon Lee adjusts his FY2025, FY2026 and FY2027 estimated DPU by a positive 0.4%, 2.1% and negative 0.1%, respectively.
Citi’s Lee factors in the recently completed acquisition of a mixed-use facility in Tokyo, revised foreign exchange (FX) assumptions, partially lower debt cost and lower NPI margins.
On the other hand, CGSI’s Lock and Ong have kept their FY2025 to FY2027 forecasted DPU estimates unchanged.
As at 4.08pm, units in MINT are trading 3 cents lower or 1.25% down at $2.43.
