Malpletree Industrial Trust reported 3QFY24 with a +1.2% QoQ but-0.9% YoY, steady portfolio performance and contribution from new assets was offset by enlarged unit base.
However, Maybank IB noted on the group’s occupancy slipping, led by US data centres (DC) partially offset by higher occupancy in hi-tech buildings. Positive rental reversion was across the property segment. While it is encouraging to see occupancy picking up in Singapore hi-tech spaces, US DC vacancy and absence of divestment gains will negatively impact DPUs. The house lowers its estimates but raises TP to SGD2.30 due to a lower discount rate. Maintain HOLD.
Stable financial performance
3Q gross revenue and NPI was SGD173.9m and SGD129.8m, respectively, +2% and +0.8% YoY. This was led by revenue contributions from the data centre in Osaka, Japan and new leases from the hi-tech spaces at Kallang Way. Portfolio NPI margin was down 90bps YoY led by hi-tech buildings and data centres. Funding cost was stable helped by JPY debt. All in cost fell from 3.2% last quarter to 3.1%. However, debt cost is expected to rise to c.3.5% from repricing. Distributions from JV were stable at c.SGD8.5m.
While distribution rose 3.1%YoY for 3Q, enlarged number of units led to 0.9% decline in DPU. On a QoQ basis, income from Osaka DC and new leases led to 1% higher NPI. Further, with lower borrowing cost and stable income from JV, distribution and DPU rose 1.2% QoQ.
Mixed operating metrics
Portfolio occupancy slipped 60bps QoQ to 92.6%. This was led by c.3ppt fall in US partly offset by 40bps increase in Singapore. Higher occupancy was seen in Singapore hi-tech buildings while business park and flatted factories was broadly stable. Broad-based positive reversion ranging from 4.1% to 10.5% was seen for renewal leases across all segments. Portfolio weight average rental reversion was +7.2%. Mgmt. is in advanced negotiations for backfilling vacated US DC spaces. Past arrears from Cyxtera lease of c.SGD2m will be distributed as a one-off next quarter.
Maintain HOLD
Maybank IB lowered its FY25 DPU estimate by c.2%, factoring in lower margins with partial offset from lower borrowing cost. While higher occupancy in hitech park is encouraging, vacancy in US data centres and further nonrenewals along with absence of divestment gains next year will negatively impact distributions. As such, the house maintains its HOLD rating.
