Company Reports

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.

Mapletree Industrial Trust, or MIT, invests in income-producing properties used for the purpose of industrial and data center activities in Singapore and the United States. Its portfolio comprises data centers, high-tech buildings, business parks, and general industrial buildings. Since its IPO, the trust’s manager has grown the trust’s assets under management and distribution per unit by using a mixture of active lease management, asset enhancement initiatives, and acquisitions.

Mapletree Industrial Trust, or MIT, invests in income-producing properties used for the purpose of industrial and data center activities in Singapore and the United States. Its portfolio comprises data centers, high-tech buildings, business parks, and general industrial buildings. Since its IPO, the trust’s manager has grown the trust’s assets under management and distribution per unit by using a mixture of active lease management, asset enhancement initiatives, and acquisitions.

Mapletree Industrial Trust’s third-quarter fiscal 2024 results (ending March) were in line with our expectations. Revenue and net property income rose 2.0% and 0.8% year on year, respectively, due to contributions from the newly acquired data center in Osaka and new leases from Mapletree Hi-Tech Park at Kallang Way. However, distribution per unit fell 0.9% year on year to SGD 0.0336 due to an enlarged unit base. There are no major surprises, so we maintain our fair value estimate of SGD 2.41 per unit. We think the units are fairly valued currently and encourage unitholders to wait for a better entry price.

Mapletree Industrial Trust posted a commendable set of operating results for second-quarter fiscal 2024 (ending March). The trust achieved a positive 8.8% rental reversions for its Singapore properties despite a slight decline in occupancy rate to 93.4% this quarter from 93.7% in the previous quarter. As for its North American portfolio, average rental rate of USD 2.42 per square feet per month was flattish quarter over quarter, but occupancy rate improved to 92.7% this quarter from 92.4% in the previous quarter. The performance was largely in line with our expectations, and we retained our SGD 2.41 per unit fair value estimate. Based on its last closing price of SGD 2.16, we think the trust is slightly undervalued and trades at an attractive fiscal 2024 dividend yield of 6.1%. We continue to like the trust for its strong sponsor and portfolio of data centers that benefits from the strong secular growth trends, such as cloud computing, artificial intelligence, 5G, and other technological advancements.

Sabana REIT’s unitholders have voted to remove ESR Group as its manager and internalize the REIT management function. This move is unprecedented in Singapore, but we think it has positive implications for the industry. This event occurred because activist investor Quarz Capital led the push. As ESR Group holds around 21% of Sabana REIT compared with Quarz Capital’s 14%, ESR Group only held a slight advantage going into the vote. Ultimately, we think ESR Group lost the vote because of concerns about potential conflicts of interest—ESR Group is the sponsor of more than one industrial REIT in Singapore—and the perception that Sabana REIT has underperformed its peers due to poor management by ESR Group.

Mapletree Industrial Trust's, or MIT's, first-quarter fiscal 2024's (ending March) portfolio statistics revealed signs of a slowing industrial leasing market as occupancies slipped across its different types of industrial properties. In the near term, we expect the industrial leasing environment to remain challenging as the outlook for manufacturing and wholesale sectors weakens. We retain our fair value estimate of SGD 2.41 given that the performance is broadly in line with our expectations. Based on the last closing price of SGD 2.29, we think the trust is slightly undervalued, trading at a fiscal 2024 dividend yield of 5.8%

Mapletree Industrial Trust is looking to raise SGD 200 million via private placement to fund the acquisition of a data center in Osaka, Japan. The acquisition marks the trust’s first entry into Japan’s data center market, which is the third largest data center market in Asia-Pacific. We are positive on this move as it is distribution per unit, or DPU, accretive, and increases the trust’s portfolio exposure to the data center asset class that benefits from strong secular tailwinds such as demand from 5G, e-commerce, and artificial intelligence. Nonetheless, as the size of the acquisition is relatively small, we retain our fair value estimate at SGD 2.41 per unit. We think the trust is currently fairly valued.

Mapletree Industrial Trust, or MIT, invests in income-producing properties used for the purpose of industrial and data center activities in Singapore and the United States. Its portfolio comprises data centers, high-tech buildings, business parks, and general industrial buildings. Since its IPO, the trust’s manager has grown the trust’s assets under management and distribution per unit by using a mixture of active lease management, asset enhancement initiatives and acquisitions.

Mapletree Industrial Trust’s fourth-quarter fiscal 2023 (ending March) net property income was in line with our estimate, growing 5.8% year on year to SGD 129 million. However, the trust’s distribution per unit of SGD 0.033 fell below our expectations due to higher borrowing cost. We lower our fair value estimate slightly to SGD 2.41 per unit from SGD 2.52, after rolling forward our estimates and factoring in the effect of valuation decay on its Singapore leasehold assets and a higher near-term cost of debt. As a result, our estimated fiscal 2024 DPU drops to SGD 0.131 from SGD 0.145. Based on the last closing price of SGD 2.36, the trust trades at a 2024 dividend yield of 5.6% and we think it is fairly valued.

Mapletree Industrial Trust, or MIT, invests in income-producing properties used for the purpose of industrial and data center activities in Singapore and the United States. Its portfolio comprises data centers, high-tech buildings, business parks, and general industrial buildings. Since its IPO, the trust’s manager has grown the trust’s assets under management and distribution per unit by using a mixture of active lease management, asset enhancement initiatives and acquisitions.

Mapletree Industrial Trust’s, or MIT’s, third-quarter fiscal 2023 (ending March) results were in line with our expectations. Supported by robust tenant retention rates of 92.2% and improving occupancy rates for its flatted factories and stack-up/ramp-up buildings, MIT’s Singapore portfolio occupancy rate continued to hit a fresh high of 96.9%. This is impressive as the completion of the development of 165 Kallang Way in November 2022 has dragged occupancy rates of its hi-tech buildings down to 94.8% this quarter from 98.6% in the previous quarter. Although MIT has successfully maintained a good performance for its Singapore assets in this fiscal year, we reiterate our view that it may be hard to keep this up in the medium to long term given the Singapore government’s track record of providing ample supply of industrial land to keep cost of doing business low. This would weigh on rents and put pressure on the trust’s occupancy rates over time. That said, we expect the trust to continue actively managing its properties to lease up vacant units and achieve rental growth for its unitholders. We maintain our SGD 2.52 fair value estimate and think the trust is fairly valued presently.

Mapletree Industrial Trust, or MIT, invests in income-producing properties used for the purpose of industrial and data center activities in Singapore and the United States. Its portfolio comprises data centers, high-tech buildings, business parks, and general industrial buildings. Since its IPO, the trust’s manager has grown the trust’s assets under management and distribution per unit by using a mixture of active lease management, asset enhancement initiatives and acquisitions.

No-moat Mapletree Industrial Trust’s, or MIT’s, second-quarter fiscal 2023 (ending March) results were largely in line with our expectations. Second-quarter fiscal 2023 gross revenue and net property income improved 12.8% and 8.3% year on year to SGD 175.5 million and SGD 130.3 million, respectively. However, distribution per unit, or DPU, fell 3.2% year on year to SGD 0.0336 due to an enlarged unit base and higher borrowing costs. Our fiscal 2023 DPU forecast is lowered to SGD 0.1402 from SGD 0.1440, translating to a fiscal 2023 dividend yield of 6.2%, after fine-tuning our model to factor in a higher near-term cost of debt. This is slightly offset by a distribution top-up of SGD 6.6 million that management plans to release over the next three quarters. Our fair value estimate of SGD 2.52 per unit remains unchanged and we think the trust is slightly undervalued with upside of 12%. We continue to like the trust for its strong sponsor and portfolio of data centers that benefits from strong secular growth trends such as cloud computing, artificial intelligence, 5G, and other technological advancements driving the data center sector.

Mapletree Industrial Trust, or MIT, invests in income-producing properties used for the purpose of industrial and data center activities in Singapore and the United States. Its portfolio comprises data centers, high-tech buildings, business parks, and general industrial buildings. Since its IPO, the trust’s manager has grown the trust’s assets under management and distribution per unit by using a mixture of active lease management, asset enhancement initiatives and acquisitions.

No-moat Mapletree Industrial Trust’s, or MIT’s, first-quarter fiscal 2023 (ending March) results were in line with our expectations and showed improvement in several operating metrics. Notably, its Singapore portfolio occupancy rate hit a record high (since listing) of 96%, on the back of rising occupancy rates across all its industrial property segments. Occupancy rate for its light industrial segment witnessed the largest improvement, jumping to 92.6% from 78.5% after divestment of the underperforming 19 Changi South Street 1, which had an average occupancy rate of 34.3% in fiscal 2022. Other portfolio metrics remain healthy, with high tenant retention rate of 86.2%, and low but improving positive rental reversions.

We are initiating coverage on Mapletree Industrial Trust, or MIT, with a fair value estimate of SGD 2.52, and no moat and stable moat trend ratings. Our fair value estimate implies a forward distribution yield of 5.7% in fiscal 2023 (ending March) and price/book value of 1.4 times. In our view, one of the strongest attributes of the trust is its management, who we think are astute allocators of capital. Since its IPO, the trust’s management has demonstrated its exceptional investment decision-making by successfully growing the trust’s assets under management and distribution per unit via yield-accretive acquisitions, asset-enhancement initiatives, and redevelopment projects. Notably, the trust invested SGD 226 million to redevelop 1 and 1A Depot Close to a built-to-suit high-tech building from a flatted factory for Hewlett-Packard’s Asia headquarters in 2017. Since its completion, the property has recorded a fair value uplift and is currently valued at SGD 414 million as of March 31. With a sound balance sheet and unitholder-friendly distribution policy to add to its exceptional investment decision-making, we assign it an Exemplary capital allocation rating and expect management to continue creating value for unitholders. However, we think the trust is fairly valued at current prices and encourage investors to wait for a better entry point before adding this well-managed REIT.

Mapletree Industrial Trust, or MIT, invests in income-producing properties used for the purpose of industrial and data center activities in Singapore and the United States. Its portfolio comprises data centers, high-tech buildings, business parks, and general industrial buildings. Since its IPO, the trust’s manager has grown the trust’s assets under management and distribution per unit by using a mixture of active lease management, asset enhancement initiatives and acquisitions.