Mapletree Industrial Trust downgraded by CGS-CIMB on high valuations

Mapletree Industrial Trust property at 18 Tai Seng in SingaporeMapletree Industrial Trust property at 18 Tai Seng in Singapore

CGS-CIMB downgraded Mapletree Industrial Trust to Hold from Add, pointing to high valuations.

The unit price is trading at 1.5 times price-to-book value and at a 5.6 percent yield for fiscal 2020, compared with the historical seven-year average of 1.2 times and 6.9 percent, respectively, the brokerage said in a note Wednesday.

“While we like MINT for its visible growth profile, we think this has been priced in and investors could look for a lower entry point,” CGS-CIMB said.

In addition, the brokerage said the trust could face lower rents ahead, even as occupancy is expected to tick higher from the 90.5 percent at the end of fiscal first quarter.

“We think occupancies could continue to inch up as 30A Kallang fills up and 7 Tai Seng comes onstream,” CGS-CIMB said.

But it added that while the average gross rental rate increased to S$2.10 per square foot per month from S$2.07 in the previous quarter due to new leases, overall rental reversions were negative.

“We expect to see continued weakness in rental reversions due to the high base for rents signed two to three years ago. Discounted rents given to existing tenants relocating from Kolam Ayer which will be recognized as new leases could also contribute to softer gross rental rate growth, in our view, the note said.

CGS-CIMB said the fiscal first quarter results were in line with its forecasts at 25 percent of its full-year estimate.

Mapletree Industrial Trust reported Tuesday its fiscal first quarter net property income increased 12.2 percent on-year to S$77.92 million on revenue contributions from new projects at 18 Tai Seng, 30A Kallang Place and Mapletree Sunview 1.

The brokerage raised its fiscal 2020 distribution per unit forecast by 1.9 percent, but lowered its view for fiscal 2021-22 DPUs by 0.1 percent to 1 percent to take into account the redevelopment of Kolam Ayer and the earlier-than-expected completion of 7 Tai Seng.

That spurred a target price increase to S$2.37 from S$2.32, the note said.

Mapletree Industrial Trust’s units were up 0.89 percent at S$2.27 at 3:27 P.M. SGT.

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