Mapletree Industrial Trust
The latest investment analysis on Mapletree Industrial Trust
Group Research - Equities25 Oct 2024
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Company Overview
Mapletree Industrial Trust is a Singapore-based real estate investment trust (REIT). The principal activity of the Company and its subsidiaries is to invest in income-producing real estate used primarily for industrial purposes in Singapore and as data centers across the world beyond Singapore, as well as real estate-related assets, with the primary objective of achieving returns from rental income and long-term capital growth. Its segments include Data Centres, Hi-Tech Buildings, Business Park Buildings, Flatted Factories, Stack-up/Ramp-up Buildings and Light Industrial Buildings. It has approximately 86 properties in Singapore and 57 properties in North America. Its properties include 161, 163 & 165 Kallang Way, 18 Tai Seng, 30A Kallang Place, 1 and 1A Depot Close, 2 Christie Heights, 6 Norden Place, 1001 Windward Concourse and 1221 Coit Road, among others. Mapletree Industrial Trust Management Ltd. is the Company's manager.


Investment Overview
Diversified “new economy” landlord with a data-center spin. Mapletree Industrial Trust ("MINT") is one of Singapore's largest industrial landlord with a portfolio of well located flatted factories, high-specification properties catering to wide ranging industries from IT, media, tech, bio-medical and varied industrial sectors. In order to diversify its earnings base and income resilience, the REIT made a strategic pivot to invest in datacenters (CSGD4.4bn worth) which now contribute close to 50% of its assets. Collectively, at an AUM of close to SGD9.0bn, is one of the largest new-economy REIT in Singapore.

Redevelopment upside drives NAV upside. Its portfolio of flatted factories are well located across Singapore can be seen as an attractive “landbank” for the REIT. MINT has over the years embark on a redevelopment journey on selected assets, extracting untapped GFA and driving shareholder value through NAV and DPU uplifts as these assets are converted to higher quality specifications properties, This redevelopment strategy can also be seen on selected assets within USA where the REIT may look to reposition after the leases expire over time.

Overcoming near term hurdle. The expiry of the AT&T leases (2nd largest tenant contributing 5% of revenues over 2HFY24 and end FY25) is of focus, with the manager actively looking to re-let part / most of its space. We understand that the manager has been able to attract new tenants which will compensate for the risk of income loss. We have priced in 50% occupancy downtime in our estimates.

Buy call, TP SGD2.60 based on DCF. We continue to like MINT and see value despite trading at a P/B of 1.2x. This is justified from the regular redevelopments that will boost its asset values, closing that valuation gap. We see fair values for the stock at more than 20% higher with target yields in the range of c.5%.  

DCF Valuation. Target price of SGD2.60 based on DCF. This is based on a WACC of 6.4% (risk free of 3.5%). We have not assumed acquisitions in our estimates. Our TP assumes a target yield of close to 5.0%. 



Risks
Rising interest rates. An increase in refinancing rates will negatively impact distributions. However, MINT has minimised the impact as c.73% of its interest cost has been fixed. 

Asset devaluations. The annual revaluation exercise coming in Apr'23 will be a key datapoint to track. While markets are expecting an expansion in cap rates due to higher interest rates in the US, the long WALE coupled with conservative valuations supports its NAV. 

Disclaimers and Important Notices


GENERAL DISCLOSURE/DISCLAIMER 

This report is prepared by 
DBS Bank LtdThis report is solely intended for the clients of DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS Bank Ltd.      

The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other factors which we may consider to be relevant or appropriate in preparing the research.  Accordingly, we do not make any representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies.

Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to update the information in this report. 

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The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that: 

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This report is being distributed in Australia by DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”) or DBSV HK. DBS Bank Ltd holds Australian Financial Services Licence no. 475946. 

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For any query regarding the materials herein, please contact Dennis Lam (Reg No. AH8290) at [email protected] 

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HONG KONG
DBS Bank (Hong Kong) Ltd
Contact: Dennis Lam
13th Floor One Island East,
18 Westlands Road,
Quarry Bay, Hong Kong
Tel: 852 3668 4181
Fax: 852 2521 1812
e-mail: [email protected]

SINGAPORE
DBS Bank Ltd
Contact: Andy Sim
Marina Bay Financial Centre Tower 3
Singapore 018982
Tel: 65 6878 8888
e-mail: [email protected]
Company Regn. No. 196800306E



INDONESIA
PT DBS Vickers Sekuritas (Indonesia)
Contact: Maynard Priajaya Arif
DBS Bank Tower
Ciputra World 1, 32/F
Jl. Prof. Dr. Satrio Kav. 3-5
Jakarta 12940, Indonesia
Tel: 62 21 3003 4900
Fax: 6221 3003 4943
e-mail: [email protected]



THAILAND
DBS Vickers Securities (Thailand) Co Ltd
Contact: Chanpen Sirithanarattanakul
989 Siam Piwat Tower Building,
9th, 14th-15th Floor
Rama 1 Road, Pathumwan,
Bangkok Thailand 10330
Tel. 66 2 657 7831
Fax: 66 2 658 1269
e-mail: [email protected]
Company Regn. No 0105539127012
Securities and Exchange Commission, Thailand