BUY S$1.14
Price Target : S$ 1.21
At a Glance
• Strong occupancies and robust rental renewals underpin performance in 1Q12
• Growth to accelerate from (i) completion of JTC portfolio acquisition; and (ii) higher rental growth profile without rental caps
• BUY, S$1.21 TP maintained.
Comment on Results
1Q12 - a strong start to the year. Mapletree Industrial Trust’s (MINT) 1Q11 results were in line with expectations. Gross revenues and net property income were higher than IPO forecast but in line with our targets at S$55.0m and S$38.2m respectively. Distributable income was higher by 9.3 % compared to IPO forecasts, translating to DPU of 1.98 Scts.
Robust portfolio performance seen. The continued robust performance was driven by higher portfolio occupancies - MINT achieved a high of 94.3% in 1Q12 ( vs 93.2% in 4Q11) - while its properties benefited from higher rental rates secured during renewals and recorded a high of S$1.52 psf pm on a portfolio basis. Renewals remain robust and positive – 99.3% of leases expired were renewed at the maximum cap (which will fall off from July’11) with strong retention rates of over 88%. New leases that were secured at market rates were also in excess of 20%-40% higher than expiring rents.
Growth to accelerate from 2Q12. Growth in the coming quarters will likely to hinge from : (i) completion of the recent tender award of JTC portfolio (cS$400m) likely in Aug’11, with funding of this purchase yet to be announced; and (ii) ability to price renewals closer to market levels for remaining 13% of topline to be renewed in the following three quarters of FY12, given the expiry of the rental caps recently.
Recommendation
BUY call maintained. Forward yields of 6.9-7.4% are attractive in our view, given its resilient and diversified portfolio with a strong sponsor backing. TP of S$1.21 offers total return of 13%.
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