Focusing on earnings quality
- Robust end to FY22 with 10% rise in DPU
- Occupancies to remain resilient supported by positive reversions as businesses expand
- Major tenant AT&T has partially renewed its lease, improving income visibility
- BUY with a lower TP of S$3.05 as we cut earnings on higher cost assumptions
Investment Thesis
Attractive valuations not to be missed. We see value emerging. The recent correction has brought P/NAV down to 1.3x with forward yields of 5.3%-5.5% close to average levels. MINT now derives c.51% of its AUM from datacenters and will continue to add strategically in this space. We like MINT for its resilience and steady growth profile amid the current market volatility, a welcome trait in these uncertain times. BUY, with revised TP of S$3.05 due to revision in earnings on higher utility costs and higher discount rate assumptions.
Certainty of growth a welcome trait. . With a long WALE and 3% CAGR in DPU over FY23-24F post earnings revision, we believe that MINT should trade like a data-center proxy. In addition, while MINT continues to tap its sponsor for acquisition-led growth given the competitive landscape, we see the manager looking within the portfolio to optimise total returns.
Redevelopment upside drives NAV upside. Further planned enhancement and redevelopment of its flatted factory portfolio into quality industrial properties to augment NAV upside.
Valuation:
DCF Valuation. Our target price of S$3.05 is based on DCF with a WACC of 6.4% and risk-free rate of 3.5%. We have not assumed acquisitions in our estimates. Our TP implies a target yield of close to 4.8%.
Where we differ:
Attractive land bank in Singapore. We believe investors have not priced in the value in MINT’s portfolio. The development of its land bank of older flatted factories will drive portfolio GFA and medium-term growth in distributions and NAV, keeping valuations at a premium.
Key Risks to Our View:
Rising interest rates. An increase in refinancing rates will be negative to distributions.