Remains focused on ESG
Improving fundamentals, maintain BUY
Under our extended ESG 2.0 methodology, MINT receives an above-average score of 54 vs the 50 average. MINT’s sustainability framework is progressive, with targets validated by Net Zero (RCP 2.6) and Business-asusual (RCP 8.5) scenario analysis. We believe improvements in GHG emissions, further disclosure on renewable energy and green financing could help drive a higher score. Maintain BUY and DDM-based TP of SGD3.00 (COE: 6.6%, LTG: 2.0%). Maintain BUY.
GHG emissions driven by new data centres
MINT has an established framework and internal policies, but could further improve on its quantitative “E” metrics. We saw a large increase in MINT’s Scope 2 GHG emissions in FY21, mainly due to four additional data centres under operational control in North America. Notably, lower scope 2 emissions are observed in its Singapore portfolio and partially offset the overall increase. In our view, MINT needs to deepen its renewable energy efforts against the backdrop of utility rate hikes, taking assets such as data centres and hi-tech buildings into consideration. We believe scores could be higher with further disclosure on renewable energy usage.
Moving towards its ESG targets
In FY21, MINT made progress in rolling out sustainability clauses for new leases in high-tech and business park assets. Among its ESG targets, MINT has lowered electricity intensity by 9% (from FY20 basis), vs 15% target for its Singapore’s portfolio by 2030. Similarly, Scope 2 emissions in FY22 are
13% lower from FY20, against the 17% reduction target by 2030. Notably, ESG forms part of management’s remuneration.
Gearing stands at 38.4% in 4Q22 and 1Q23, with the cost of borrowing at 2.5% (vs.2.4% in 4Q22). We expect a 50bps increase in interest rates, lowering DPU by <1%. Total borrowing is SGD2941m, 72.3% hedged at fixed rate. Green financing accounted for 13.4% of total borrowing in FY21; this data wasn’t published for FY22. Continued disclosure on green financing would be a plus.