Lower DPU but positive rental reversions for Mapletree Industrial Trust leave analysts mixed

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Analysts are divided on Mapletree Industrial Trust’s (MINT) first quarter results for financial year 2024, ended June 30. During the quarter, the trust’s distribution per unit (DPU) dipped by 2.9% year-on-year, though it saw a 1.8% quarterly increase. This is in line with the expectations of OCBC Investment Research, DBS Group Research and CGS-CIMB Research. Maybank Securities have maintained their “hold” call, after noting MINT’s stable DPU.

Gross revenue and net property income (NPI) for the trust saw a 1.7% and 0.7% increase year-on-year at $170.6 million and $130.8 million respectively, thanks to the contribution of new leases. On the other hand, higher utilities and maintenance expenses led to a decreased DPU.

OCBC Investment Research is the most bullish on MINT, with an increased target price from $2.77 to $2.78. According to the team, MINT offers investors a proxy to the fast-growing digitalisation and data outsourcing trends, with a sizeable portfolio of industrial assets in Singapore. They have also achieved positive rental reversions for their renewal leases despite under pressure occupancy rate.

The research team notes that for every 100 basis points (bps) increase in base interest rates, MINT’s pro forma 1QFY2024 DPU will experience a negative impact of -1.4%. Moreover, MINT’s overall portfolio weighted average rental reversions stood at 5.3%. Average rental rate for its Singapore and North American portfolios further rose 0.9% and 0.4% quarter-on-quarter to $2.18 per square foot (psf) per month and US$2.41 ($3.20) psf per month respectively.

For the 1QFY2024, the portfolio occupancy rate declined for a second consecutive quarter, by 1.6 percentage points (ppt) quarter-on-quarter to 93.3%. Singapore and North America contributed to this fall at -1.7 ppt and -1.3 ppt respectively.

CGS-CIMB has maintained their target price for MINT at $2.61, on account of their healthy balance sheet and increasing exposure to the new economy sectors. Meanwhile, Lock Mun Yee and Natalie Ong from the team highlight MINT’s proposed acquisition of a data centre in Osaka for JPY52 billion ($507.9 million), which would increase its exposure to data centres to 56.3% of FY2023 assets under management (AUM). Additionally, the analysts expect the overall blended funding cost to trend down, with the addition of more Japanese yen loans.

DBS Group Research analysts Derek Tan and Dale Lai have maintained their “buy” call, though they have lowered their target price from $2.70 to $2.60. Tan and Lai note that investors will likely focus on near term risk factors due to the expiry of the AT&T lease, contributing to 5.3% of gross rental income as of June 2023. The team is comforted by MINT’s active pursuit of other tenants or divestment or reposition of the property for other uses.

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Maybank analysts however have kept their “hold” call at a target price of $2.30, citing the slowdown in local manufacturing sector and the fluid funding environment. As at 11.55am, shares in Mapletree Industrial Trust are trading 3 cents lower or 1.32% down at $2.24.