Overview of Mapletree Industrial Trust (MINT)

Mapletree Industrial Trust (MINT), a prominent REIT in Singapore, reported stable performance in its latest quarterly results. The trust’s robust portfolio spans industrial properties across Singapore, Japan, and the United States. It is backed by its sponsor, Mapletree Investments, which is owned by Temasek Holdings. MINT’s diversified tenant base and focus on multi-tenant assets make it resilient, even in challenging market conditions.

Key Financial Highlights

For the third quarter of FY25, MINT declared a Distribution Per Unit (DPU) of SGD 3.41 cents, marking a 1.2% quarter-on-quarter (QoQ) and 1.5% year-on-year (YoY) increase. Gross revenue and Net Property Income (NPI) reached SGD 177.3 million and SGD 133.2 million, respectively, reflecting YoY growth of 2.0% and 2.6%.

The growth was primarily driven by revenue contributions from its recent acquisition of a freehold mixed-use facility in Tokyo and the completion of major data center projects in Osaka. However, the topline was partially offset by higher borrowing costs and non-renewal of leases in Singapore clusters. Portfolio occupancy stood at 92.1%, slightly lower than previous quarters.

Tokyo Acquisition and Data Center Expansion

MINT’s acquisition of a freehold mixed-use facility in Tokyo significantly bolstered its revenue streams. Additionally, the completion of the second and third phases of a data center project in Osaka further enhanced its income. These moves showcase the trust’s strategic focus on expanding its presence in high-demand regions.

Strong Capital Management

MINT demonstrated prudent capital management, with its borrowing costs decreasing from 3.2% to 3.1%, attributed to lower floating rates and favorable JPY debt terms. Gearing edged up slightly to 39.8% from 39.1% in the previous quarter, but the trust remains focused on tenant retention to maintain stable occupancy levels.

Updated Estimates and Recommendations

Maybank Research made minor adjustments to its DPU estimates, revising FY25 by +0.2% and FY26 by -0.5% to account for lower borrowing costs and reduced distributions from joint ventures. Despite fluctuations in occupancies, MINT’s positive rent reversions and prudent cost management underpin the firm’s stable performance.

Recommendation: BUY with a target price of SGD 2.60, representing a 24% upside from the current price of SGD 2.21.

Value Proposition and Growth Drivers

MINT is the third-largest industrial REIT in Singapore, boasting an impressive SGD 8.8 billion in Assets Under Management (AUM). Its strategic investments in high-tech buildings, including data centers in the US and Japan, have driven substantial growth. The completion of redevelopment projects in Singapore and acquisitions in the US data center market are expected to sustain DPU growth over the next few years.

The trust has a strong balance sheet with an aggregate leverage of 38.4% and an estimated SGD 1.7 billion debt headroom to support future acquisitions.

Historical Performance and Strategic Moves

• July 2019: Redevelopment of the Kolam Ayer 2 cluster into a high-tech precinct at SGD 263 million, delivering an 8.0% yield-on-cost.
• June 2020: Acquired a 60% stake in 14 US data centers from its sponsor, raising its hi-tech contribution to 59.9% of AUM.
• May 2021: Acquired a USD 1.32 billion US data center portfolio, adding 29 facilities to its portfolio.
• June 2022: Divested a data center in Southfield, Michigan.
• May 2023: Entered the Japanese market with the acquisition of a data center in Osaka for JPY 52 billion.

Environmental, Social, and Governance (ESG) Initiatives

MINT has been making strides in sustainability, achieving BCA Green Mark Gold certifications for eight property clusters in Singapore. The trust has set ambitious long-term goals to reduce GHG emissions and increase solar energy capacity. It also reports electricity and GHG emissions for six US data centers within its operational control.

The trust demonstrates high board independence, with six out of eleven members being independent. It also boasts a strong gender diversity ratio, with 52% of employees and 50% of its management team being female.

Risks and Challenges

MINT faces potential risks, including higher interest rates, lower occupancy rates in US data centers, and rising operating costs. Prolonged economic slowdowns could also impact demand for industrial space, potentially lowering occupancy and rental rates.

Conclusion

Mapletree Industrial Trust remains a compelling investment opportunity due to its strategic acquisitions, robust portfolio, and prudent financial management. Maybank Research’s recommendation to BUY underscores the trust’s potential for long-term growth, bolstered by its continued expansion in high-tech and data center assets across key global markets.