Analysts at OCBC Investment Research, DBS Group Research and CGS International have kept their respective “buy” and “add” calls on Mapletree Industrial Trust ME8U (MINT) at an unchanged fair value of $2.71 and target prices of $2.60 and $2.61 respectively.
The research team at OCBC notes in its July 26 report that the REIT’s 1QFY2025 gross revenue and net property income (NPI), which came in 2.7% higher y-o-y at $175.3 million and 1.3% greater y-o-y at $132.5 million respectively, stood in-line with the research team’s expectations.
“This was driven by organic growth from previous rental uplifts secured and contribution from its data centre acquisition in Osaka, Japan but partially offset by divestments, lower occupancy rates in the US compared to the same period a year ago and higher property operating expenses,” the team notes.
During the same period, MINT managed to lower its borrowing costs by 0.9% y-o-y, and recorded a 45.9% increase in distribution declared by its joint ventures, it adds.
Overall, the REIT’s dividend per unit (DPU) for the 1QFY2025 rose by 1.2% y-o-y to 3.43 cents and accounted for 24.8% of the research team’s initial FY2025 forecast.
Meanwhile, the quarter also saw robust rental reversions for MINT’s renewal leases signed in Singapore, ranging between 2.7% and 12.3%, or 9.2% on an overall portfolio weighted average basis.
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The higher rents secured were broad-based across all segments, resulting in the average rental rate for MINT’s Singapore portfolio growing 1.8% q-o-q to $2.26 psf per month.
“There were also some positives on MINT’s portfolio occupancy, which increased by 0.5 percentage points (ppts) q-o-q to 91.9 % . Singapore and Japan’s portfolio occupancy was flat, but there was an increase of 1.6 ppts q-o-q to 87.8% in the US as management secured a new lease at its 402 Franklin Road, Brentwood property,” writes the team.
They continue: “This was the property that was previously leased to AT&T. AT&T remains a tenant within MINT’s portfolio, but its contribution to MINT’s gross rental income has come down to 3%, from 5.3% a year ago.”
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While the REIT’s aggregate leverage ratio has increased sequentially for the third consecutive quarter, last standing at 39.1 % as at June 30 , the proportion of debt hedged declined from 84.6 % to 82.1% but “still remains” at a “relatively high” level.
MINT’s average borrowing cost also inched up 10 basis points (bps) q-o-q to 3.2 %, while the adjusted interest coverage ratio came in “healthy” at 4.3 times.
With this, the research team at OCBC has trimmed its FY2025 and FY2026 DPU forecast slightly by 0.6 % and 0.4% on higher borrowing cost assumptions.
Meanwhile, the team at DBS notes that MINT’s stronger performance was additionally boosted by a $2.6 million one-off compensation payment in relation to a redevelopment project, which will be paid out in subsequent quarters.
The team also sees that the REIT’s management has adopted a “conservative” financial management style, with its stable leverage ratio of 39.1% and its (debt + perpetual) / asset ratio at 39.6%.
They write: “Looking ahead, management expects the overall cost of debt to rise to around 3.5% in the coming year, which we have priced in. As such, adjusted interest coverage ratio (ICR) remains stable and comfortable at 4.3 times and our calculated adjusted earnings before interests, taxes, depreciation and amortisation (ebitda) ICR ratio is at around 3.8 times.”
“The trust is resuming its dividend reinvestment plan in the current quarter which will further strengthen the REIT’s balance sheet,” adds the team.
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On MINT’s operating outlook, the REIT “expects to see” occupancies in the US “remaining under pressure” due to the termination of space from a co-location player by the end of FY2025 and will be “actively looking” to address this risk.
Overall, the team at DBS believes that MINT’s valuations “remain inexpensive” at around 1.26 times price-to-book ratio (P/B), while its FY2024 to FY2025 yields of around 5.9% are “slightly higher” than historical averages.
They write that while the REIT’s share price has declined by 9.0%, it is more resilient than its larger cap peers thanks to its diversified exposure in Singapore, the US and Japan, as well as for its pivot to the growing datacenter subsector, which remains on a firm growth trend.
“We see investors gravitating towards MINT especially when overall economic conditions remain uncertain as its diversified portfolio has proven to be able to weather the downturns,” concludes the team at DBS.
Finally, CGS International’s Lock Mun Yee and Natalie Ong see strength in the REIT’s Singapore data centre space.
“In Singapore, higher take-up at its Singapore DC and hi-tech buildings offset lower occupancy at its business parks and flatted factory properties, thus keeping overall Singapore occupancy stable,” write Lock and Ong.
They add: “Looking ahead, MINT has 11.4%/17.3% of its gross rental income to be renewed in 9MFY2025/FY2026, mainly from its Singapore flatted factories and the US data centre segment.
As at 2.46 pm, units in MINT are trading three cents higher or 1.32% up at $2.30.
