MINT's DPU should be supported by contributions from on-going redevelopment projects and AEI: Maybank Securities

Felicia Tan
3-min read

Maybank Securities has kept its 'buy' call on MINT with an unchanged TP of $3.

Maybank Securities analyst Li Jialin is keeping her “buy” call on Mapletree Industrial Trust (MINT) as the REIT remains focused on its environmental, social and governance (ESG) targets. ESG is a consideration that forms part of the REIT manager’s remuneration as well, the analyst notes.

Li has also kept her target price unchanged at $3 as the REIT receives an above-average score of 54 compared to the average score of 50 under Maybank’s extended ESG 2.0 methodology.

“MINT’s sustainability framework is progressive, with targets validated by net zero (RCP 2.6) and business-as-usual (RCP 8.5) scenario analysis,” Li writes in her report dated Oct 6.

RCP, or representative concentration pathway, is a greenhouse gas concentration trajectory adopted by the Intergovernmental Panel on Climate Change (IPCC). The RCP 8.5 pathway is said to deliver a temperature increase of around 4.3 degrees Celsius by the year 2100.

“We believe improvements in greenhouse gases (GHG) emissions, further disclosure on renewable energy and green financing could help drive a higher score,” she adds.

In the FY2021 ended March, the REIT registered a large increase of Scope 2 GHG emissions due to the four additional data centres in North America. The higher emissions were partly mitigated by the lower Scope 2 emissions from MINT’s Singapore portfolio.

On this, the REIT needs to deepen its renewable energy efforts against the backdrop of utility rate hikes, taking assets such as data centres and hi-tech buildings into consideration, notes Li.

“We believe scores could be higher with further disclosure on renewable energy usage,” she adds.

As at the 4QFY2022 and 1QFY2023, MINT’s gearing stood at 38.4% with the cost of borrowing at 2.5% as at June 31.

To Li, an increase of 50 basis points (bps) in interest rates would lower MINT’s distribution per unit (DPU) by less than 1%.

“Total borrowing is $2.94 billion, 72.3% hedged at fixed rate,” she notes. “Green financing accounted for 13.4% of total borrowing in FY2021; this data wasn’t published for FY2022. Continued disclosure on green financing would be a plus.”

MINT is the third-largest industrial sector Singapore REIT (S-REIT) with 141 properties across assets under management (AUM) of $8.8 billion.

Backed by sponsor Mapletree Investments, MINT has a resilient portfolio thanks to its well-spread out tenant base and lower conversion risk given greater proportion of multi-tenant assets.

The REIT’s completed redevelopment projects in Singapore together with its US data centre portfolios from FY2019 onwards, should support DPU growth and visibility from the FY2022 to FY2024, says Li.

MINT’s strong balance sheet with aggregate leverage at 38.4% and an estimated $1.7 billion in debt headroom (at 45% limit) will help it in supporting acquisition growth opportunities, the analyst adds.

In addition, MINT’s DPU should be supported by contributions from its on-going redevelopment projects and asset enhancement initiatives (AEI), as well as contributions from the acquisition of the various US data centres from the 3QFY2018.

“[MINT’s] net property incomes (NPIs) should [gradually] rise from a higher contribution of triple-net-leases. We forecast data centres in Singapore and the US to generate 59% of MINT’s NPI in FY2024, up from 31% in FY2020,” Li writes.

Units in MINT closed 2 cents higher or 0.86% up at $2.36 on Oct 11.

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