Mapletree Industrial Trust: Mispriced risks, value play
- Recent price weakness is an opportunity to add MINT, currently trading at -1SD of its historical trading ranges
- Mispricing of well-balanced portfolio due to concerns on upcoming expiries in the USA
- Well timed acquisitions, a diversified and expanding platform coupled with active lease-up of newly completed developments are set to drive growth
- Maintain BUY, TP revised to SGD 2.60
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Concern over income stability is over-played as Singapore’s cashflows are on a steady growth trajectory. MINT’s portfolio has continued to deliver resilient earnings over the years and has consistently delivered earnings exceeding both our and consensus estimates. The recent 9M25 results further reinforced this trend of steady portfolio occupancy and positive rental reversions of c.9.8% across most property segments in Singapore. 9M25 distributable income was also c.80% of our full year estimates, suggesting that full-year performance is likely to post a strong beat. Considering the strong operational results, we have revisited our estimates, raising DPU by 3% in FY25F and lowering by 4%-7% in FY26-27F to account for more conservative occupancy assumptions.
Active management of US datacenters to manage renewals remains key. MINT maintains a three-pronged approach towards managing their datacenters. The result of this strategy has been ahead of investors’ expectations. Based on the age of the datacenters and smaller power capacity, most may have been underutilised. MINT has backfilled 76% of expiring leases in the past 2 financial years (FY24 and FY25), demonstrating the continued relevance of the assets to end users. Nevertheless, for leases that have not been renewed, the manager continues to look to rebalance the portfolio, divesting properties when appropriate to unlock value, and deleveraging in the process.
In the next two financial years, a couple of leases or close to c.6% of its revenues in the USA are expected to be returned. While some investors have concerns about the impact on distributions in the coming years, we believe that downside is limited, partially compensated by (i) steady organic growth at its Singapore portfolio and rental escalations from its leases covering close to c.60% of its portfolio, (ii) contribution from Brentwood (leased to healthcare tenant and expected to start contributing from Jun’25 after the initial rent free period), (iii) increased contribution from its Japan datacenters.
Watch expiry of San Diego datacenter leased to AT&T in May’26, but stronger lease up at Hi-Tech Park @ Kallang Way could compensate for lease drop off. The upcoming lease expiry at 7337 Trade Street, San Diego had seen a 2nd extension of the lease by 17 months till May’26 (or 1QFY27). While we have factored in the lease expiry of the property given the tight market conditions, we believe there is good optionality for the asset to be either re-let or sold to 3rd parties. Nevertheless, in our forecasts, we have assumed 10 ppt higher in-place occupancy at Hi-Tech Park @ Kallang Way, which should more than compensate for this loss of income.
A well-balanced portfolio that is mis-priced in the current market. Overall, we believe that investors have largely ignored MINT’s balanced geographical exposure (c.47% in Singapore, c.7% in Japan and 46.1% in the USA) that offers stable returns across market cycles. Despite the widely anticipated vacancies in the US datacenter portfolio, we see its Singapore and Japan properties balancing the overall income profile. In Singapore, portfolio occupancy rates have remained resilient at c.93-94% with reversions of 5%-9%. Upside will come from the progressive lease up of Hi-Tech Park @ Kallang Way (c.58% leased as of 3QFY25, projected to hit 70% milestone by end FY26, 85% in FY27), which in our opinion, is conservative.
What our estimates reflect?
Based our revised projections, we believe most of the loss of income from non-renewals for the US data-centers will be largely compensated by higher contributions from the its past acquisitions (Japan) and new contribution from Brentwood, rental escalations, and continued lease-up of its asset at Hi-Tech Park @ Kallang Way.
In FY27F, while the major lease expiry from AT&T at San Diego amounting to 3% of revenues remains the key uncertainty, we believe that the shortfall can also be compensated by continued lease-up at Hi-Tech Park @ Kallang Way, leading to stability for overall distributions.
Why does MINT deserve a re-look at this level? After the recent share price correction, we believe MINT warrants a re-look as it is trading below -1 standard deviation of the mean. With income resilience proving steadier than market expectations, we anticipate a relief rally in the stock, driving valuations back towards historical mean levels.
MINT offers good value on various valuation metrics. Looking at the various valuation metrics – DCF (our basis) EBITDA yield, P/B, target yield and target yield spread – MINT offers good value at the current level, with potential upside ranging from SGD 2.32 – SGD 2.60, supported by historical trading range. With MINT’s earnings expected to exceed consensus, we see a lift in the stock’s overhang, supported by its valuation at more than -1 standard deviation (SD) of the mean.
| FY Mar | 3Q2024 | 2Q2025 | 3Q2025 | % chg yoy | % chg qoq |
|---|---|---|---|---|---|
| Gross revenue | 174 | 181 | 177 | 2.0 | (2.3) |
| Property expenses | (44.0) | (46.9) | (44.1) | 0.1 | (6.1) |
| Net Property Income | 130 | 135 | 133 | 2.6 | (0.9) |
| Other Operating expenses | (16.8) | (17.1) | (16.9) | 0.3 | (1.2) |
| Other Non Opg (Exp)/Inc | 0.01 | 1.40 | (2.83) | nm | nm |
| Net Interest (Exp)/Inc | (25.5) | (26.7) | (25.6) | (0.7) | 4.0 |
| Exceptional Gain/(Loss) | 0.00 | 0.00 | 0.00 | - | - |
| Net Income | 97.2 | 100.0 | 95.8 | (1.4) | (4.1) |
| Tax | (1.79) | (1.83) | (0.52) | (71.0) | (71.5) |
| Minority Interest | (0.04) | (0.05) | (0.06) | (36.4) | 13.2 |
| Net Income after Tax | 92.9 | 95.7 | 92.9 | (0.1) | (2.9) |
| Total Return | 92.9 | 95.7 | 92.9 | (0.1) | (2.9) |
| Non-tax deductible Items | (1.85) | 0.74 | 4.60 | nm | 522.2 |
| Net Inc available for Dist. | 95.3 | 96.4 | 97.5 | 2.3 | 1.1 |
| Growth & Ratio | |||||
| Net Prop Inc Margin (%) | 74.7 | 74.1 | 75.1 | ||
| Dist. Payout Ratio (%) | 200.0 | 200.0 | 200.0 |
Source of all data: Company, DBS
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