Mapletree Industrial Trust Earnings: Cutting Fair Value Estimate Due to Its North American Portfolio

Mapletree Industrial Trust's fourth-quarter fiscal 2024 (ending March) net property income, or NPI, and distribution per unit, or DPU, were in line with our estimates, growing 2.2% and 0.9% year on year, respectively. However, we were slightly surprised that its North American data center portfolio's valuation declined by 5.9% year on year due to expansion in cap rate and higher discount rate. In addition, four properties with office components in North America took a huge cut in valuation, with 250 Williams Street's value dropping by 28% year on year. We lowered our fair value estimate to SGD 2.30 per unit from SGD 2.41 after raising our terminal exit cap rate for the trust's North America portfolio by 50 basis points. Our terminal exit cap rate for its Singapore properties remains unchanged. We also lowered our near term NPI margin assumptions as the trust continues to incur property taxes and expenses during leasing downtime. As a result, our DPU estimates for fiscal 2025-27 are lowered by 1.1%-3.3%. We expect fiscal 2025 DPU to see a smaller decline as impact of lower NPI margin is offset slightly by a SGD 13 million distribution top up by the trust for the sale of Tanglin Halt Cluster in March 2024. We think the trust is fairly valued currently, and we encourage investors to wait for a better entry price.