Overview of Mapletree Industrial Trust (MINT)
Mapletree Industrial Trust (MINT) is a diversified real estate investment trust with a portfolio comprising income-producing industrial properties in Singapore and data centres globally. MINT continues to position itself as a key player in the real estate and data centre sectors, leveraging its diversified assets to buffer against economic uncertainties and trade tensions.
Q3 FY2025 Performance Overview
MINT reported robust results for the third quarter of FY2025, with several key milestones achieved:
- Gross Revenue: S\$177.3 million, a 2.0% year-on-year increase driven by recent acquisitions in Japan.
- Net Property Income (NPI): S\$133.2 million, up 2.6% year-on-year due to broad-based rental reversions in Singapore.
- Distributable Income: S\$97.1 million, a 2.0% increase, supported by lower interest expenses.
- Distribution Per Unit (DPU): 3.41 Singapore cents, reflecting a 1.5% year-on-year growth.
Key Drivers of Growth
Acquisitions in Japan
MINT’s acquisition of a freehold mixed-use facility in Tokyo and the Osaka data centre’s second and third phase outfitting were important contributors to its revenue growth. The mixed-use facility in Tokyo comprises data centres, back-office facilities, training spaces, and accommodation wings. These strategic acquisitions have bolstered MINT’s exposure to Japan, now accounting for 6.6% of its assets under management (AUM).
Positive Rental Revisions
Singapore’s portfolio achieved a broad-based rental reversion of 9.8% during Q3 FY2025, with the following breakdown:
- Hi-tech buildings: +5.4%
- Business parks: +14.4%
- Flatted factories: +10.1%
- Stack-up/ramp-up buildings: +8.6%
The North American portfolio also saw a 2.1% year-on-year increase in average rental rates.
Portfolio Occupancy and Redevelopment Potential
MINT’s overall portfolio occupancy dipped slightly by 0.8 percentage points quarter-on-quarter to 92.1%. However, several opportunities for improvement were highlighted:
- Hi-tech buildings: Occupancy dropped to 85.6% due to a non-renewal by Synapxe, a national HealthTech agency. The management expects to backfill this space within 6-9 months.
- Stack-up/ramp-up buildings: Occupancy eased to 96.7%, but strong demand is expected to fill the vacant spaces quickly.
- Data centres: Occupancy remained stable at 91.6%, with committed occupancy in Mapletree Hi-Tech Park improving by 3.1 percentage points to 57.6%.
Notably, the mixed-use facility in West Tokyo offers redevelopment potential into a multi-storey core-and-shell data centre with a capacity of 30-40MW of IT workload. The redevelopment cost is estimated at S\$200-300 million, potentially enhancing yield on cost to 5.5-6.0%.
Financial Metrics and Debt Profile
MINT’s financial health remains stable, supported by prudent debt management:
- Aggregate Leverage: Increased marginally to 39.8% as of December 2024.
- Interest Coverage: Resilient at 4.3x, with 78% of borrowings hedged to fixed interest rates.
- Average Cost of Debt: Eased to 3.1% in Q3 FY2025 but is expected to rise slightly to 3.2% in FY2025 and 3.3% in FY2026 due to the expiration of low-interest-rate hedges.
Future Outlook and Strategic Initiatives
Focus on Data Centres
MINT aims to expand its footprint in established data centre markets across Asia Pacific and Europe, including Hong Kong, Japan, South Korea, London, Dublin, Frankfurt, Amsterdam, and Paris. This strategic diversification will reduce concentration risks and enhance long-term growth.
Redevelopment and Acquisitions
The management plans to redevelop flatted factories into hi-tech industrial parks in Singapore and acquire the remaining 50% stake in a portfolio of 13 data centres from Mapletree Investments.
Valuation and Recommendation
UOB Kay Hian maintains a BUY recommendation for MINT, with a target price of S\$2.89. This valuation is based on the Dividend Discount Model (DDM), incorporating a cost of equity of 7.0% and a terminal growth rate of 2.2%. The revised risk-free rate assumption of 3.00% reflects the elevated Singapore government bond yields.
Key catalysts for share price growth include:
- Expansion of data centre operations in Singapore, Japan, and the US.
- Strategic acquisitions and redevelopments that enhance portfolio value and returns.
