Diversifying Growth

Growth from US data centres

MINT delivered a strong 2Q22, as DPU rose 11.9% YoY/3.6% QoQ, with the consolidation of its 14 US data centres and contributions from the recent US portfolio acquisition and 8011 Villa Park Drive (in Virginia, US). The performance was in line with our estimates and the street, and our forecasts remain unchanged. MINT boasts stronger fundamentals with improved DPU visibility from its rising data centre tenancies. Its balance sheet is strong and we see further DPU-accretive deals, as management
advances diversification efforts to deepen data centre concentration to 50-67% of AUM. Our DDM-based TP (COE: 5.9%, LTG: 2.0%) stays at SGD3.35. BUY.

Lower occupancy, larger US AUM

Portfolio occupancy was lower at 93.7% (from 94.3% in 1Q22), as it fell in the US from 97.8% to 93.9%, with the addition of the 29 data centre portfolio in Jul, which was 87.8% occupied. The assets’ long 7.6-year WALE extended its portfolio WALE from 3.7 years to 4.3. In Singapore, occupancy increased slightly from 93.4% to 93.6%, underpinned by improvements for flatted factories (91.0% to 92.0%) and light industrial buildings (78.7% to 83.1%). Leasing remains competitive for its older business park assets
(from 83.6% to 82.6%) due to tenant downsizing.

Stable rents, recovery from 2H22

Gross rents in Singapore rose 4.9% YoY and were flat QoQ at SGD2.13 psfpm (from +2.4% YoY and +3.9% QoQ in 1Q22), with lower rental relief. Rental reversions remained in negative territory for its flatted factories at -1.6% (from -1.5% in 1Q22), business parks at -5.8% (from -7.0%), and stack-up/ ramp-up property at -0.8% (from 0%), while high-tech space reversions were better at +4.1% (from +0.5%). Management expects these trends to persist in the near term, and for rents to bottom out in 2H22.

Data centre AUM set to rise further

Gearing rose to 39.6% from 31.0% (as at end-Jun 2021) on the back of a c.25% jump in its AUM to SGD8.5b, of which c.53% are in data centres. Its balance sheet remains strong with 6.2x interest cover, and an estimated SGD1.4b debt headroom (at 45% limit). We think management is eyeing acquisition growth from more sizeable deals (in US and Europe), as it aims to deepen its data centre core and further diversify its AUM.