Mapletree Industrial Trust (MINT SP) – Strong end to FY22
• 4QFY22 (financial quarter to end-Mar 2022) distribution per unit (DPU) grew 5.8% yearto-year (YoY) to 3.49 Singapore cents
• Mostly positive rental reversions for renewal leases
• Overall portfolio occupancy improved to 94.0%
4QFY22 results met our expectations – MIT reported its 4QFY22 results which met our expectations. Gross
revenue and net property income (NPI) jumped 35.5% and 35.3% YoY to SGD164.1m and SGD124.2m, respectively. The significant increase was due largely to contribution from acquisitions. DPU grew 5.8% YoY to 3.49 Singapore cents, and this was boosted by the distribution of divestment gains from the sale of 26A Ayer Rajah Crescent. For FY22, MIT’s NPI rose 34.5% to SGD471.981m and DPU grew 10.0% YoY to 13.80 Singapore cents, with the latter forming 101.5% of our forecast. Management mentioned during the analyst briefing that its data centre assets in North America and Singapore are mostly on triple-net leases, and thus tenants are responsible for their own electricity costs. The main impact will come from its multi-tenanted properties in Singapore. Utility costs amounted to ~SGD6m for MIT in FY22, which is less than 5% of its property operating expenses. Its fixed tariff rate contract is expiring at the end of May 2022, and upon entering into new utility contracts, the management expects such costs to potentially double or triple, which could result in a -2% to -3% impact on its NPI.
Positive rental reversions (renewal leases) for three out of four segments in 4QFY22 – MIT registered another quarter of decent rental reversions in 4QFY22. This came in positive at 0.6% for Flatted Factories, 2.0% for Hi-Tech Buildings and 3.0% for Stack-Up/Ramp-Up Buildings. The only negative came from its Business Park Buildings (-2.1%). Average gross rental rate for MIT’s Singapore portfolio remained unchanged quarter-on-quarter (QoQ) for four consecutive quarters at SGD2.13 psf/month. Overall portfolio occupancy rose 0.4 percentage point (ppt) QoQ to 94.0% due to an uplift in Singapore (+0.7 ppt QoQ to 94.4%), as its US portfolio occupancy remained unchanged at 93.3%. Tenant retention rate remained high and stable at 83.9% in 4QFY22 for its Singapore portfolio. Portfolio revaluation gains of SGD87.0m helped lower aggregate leverage ratio to 38.4% – MIT recorded a portfolio revaluation gain of SGD87.0m in FY22. This was driven largely by compression in cap rates for its North American data centres. The portfolio revaluation gains, coupled with MIT’s distribution reinvestment plan, helped to lower its aggregate leverage ratio by 1.5 ppt QoQ to 38.4%. 70.5% of its debt has been hedged, though this was lower as compared to end-3QFY22 (79.7%). MIT’s net asset value (NAV) per unit rose 3.3% QoQ and 12.0% YoY to SGD1.86. We lower our FY23 DPU forecast by 1.3%, and raise our risk-free rate assumption from 1.9% to 2.5%. After rolling forward our valuations, our fair value estimate declines from SGD3.30 to SGD3.05.
ESG Updates
MIT’s ESG rating was upgraded in Nov 2021. The upgrade was largely driven by improvements in MIT’s corporate governance practices, particularly in its executive pay disclosures. Although there were previously concerns over the number of transactions with its sponsor, we believe there are mitigating factors to protect minority unitholders’ interests. For example, the properties to be acquired have to be valued by an independent valuer. Furthermore, MIT has historically been able to acquire properties from its sponsor at a discount to the independent valuation and make it DPU and NAV accretive to unitholders. MIT also provided more disclosures with regards to its environmental risk management. It intends to progressively install solar panels at its Singapore Flatted Factories clusters from FY23, and is aiming to obtain BCA Green Mark certification for Serangoon North Cluster. It has also set long-term targets which it will strive to achieve by FY30 (comparison from the base year of FY20): reduce its average building electricity intensity by 15%, lower its average building GHG Emissions Intensity by 17% and to generate total solar energy generating capacity of 10k kilowatts peak (kWp). BUY. (Research Team)