Healthy rental reversions
- 1QFY3/24 DPU of 3.39 Scts was in line at 24.8% of our FY24 forecast.
- MINT saw a slight dip in 1QFY3/24 portfolio occupancy, though it continued to achieve positive rental reversions.
- Reiterate Add with an unchanged TP of S$2.61.
1QFY3/24 results highlights
MINT reported a 1.7% yoy rise in 1QFY3/24 revenue to S$170.6m, thanks to contributions
from new leases across various property clusters, but distribution income (including
divestment gains and tax-exempt income) fell 2.5% yoy, impacted mainly by higher interest
cost. 1Q DPU dipped 2.9% yoy to 3.39 Scts, also in part due to an expansion in unit base
following a private placement exercise in May 23 and distribution reinvestment plan.
Portfolio occupancy dipped qoq
Portfolio occupancy slipped 1.6% pts qoq to 93.3% in 1QFY24, with the addition of new completed space from Mapletree Hi-tech Park @ Kallang Way as well as non-renewal of some Singapore and US data centre leases. Weighted average rental reversions in 1QFY24 was +5.3%, with a tenant retention rate of 83%. Looking ahead, MINT has 11.8%/15.7% of its gross rental income to be renewed in 9MFY24F/FY25F, mainly from its Singapore flatted factories and hi-tech buildings and US data centres. Management guided that it expects rental reversions to be in the low single-digit levels in FY24F. In addition, management indicated that it is currently in talks with a potential replacement tenant at one
of its US data centres.
Increasing exposure to the new economy sectors
In terms of strategy, MINT articulated that it would look to strengthen its portfolio through accretive acquisitions and explore opportunistic divestment opportunities to rebalance its portfolio. It announced the proposed acquisition of a data centre in Osaka, Japan, in May, which would increase its exposure to data centres to 56.3% of FY23 AUM. MINT indicated that while current prices of data centres are lower than two years ago, pricing is still tight when compared to current funding levels. In addition to data centres, MINT highlighted that it may also look at hi-tech properties catering to R&D and life sciences.
Healthy balance sheet
MINT’s aggregate leverage stood at 38.2% as at end-1QFY24. Its all-in funding cost was stable qoq at 3.5%, with the addition of more ¥ loans taken to finance the purchase the Osaka data centre, while its adjusted interest coverage ratio stood at 4.4x. Management guided that the overall blended funding cost should trend down over the next few quarters, with the addition of ¥ loans.
Reiterate an Add rating
We raise FY24-26F DPU by 0.4-1.24% to factor in the Osaka acquisition, enlarged units base following the recent private placement as well as update our model post the release of its FY3/23 annual report. Our DDM-based TP is maintained at S$2.61. Potential re-rating catalyst: better-than-projected rental reversions. Downside risk: global slowdown that could lead to a longer recovery period for vacancies and rentals, and longer and higher-thanexpected interest rate environment that could impede inorganic growth activities.