Price target has been raised to S$2.60 from S$2.15 to account for a lower risk-free rate of 2.75 per cent versus 3 per cent previously
MAYBANK Securities has upgraded its call on Mapletree Industrial Trust (MIT) to “buy” from “hold” after its manager announced its planned acquisition of a freehold mixed-use property in Tokyo for 14.5 billion yen (S$130 million).
The research house raised its price target to S$2.60 from S$2.15 to account for a lower risk-free rate of 2.75 per cent versus 3 per cent previously. Its forecasts for FY2025 to FY2026 have been lifted by 0.2 to 0.5 per cent to factor in topline contributions from the asset upon its expected completion in Q4 of 2024.
In a report on Wednesday (Oct 2), analyst Li Jialin said she sees potential redevelopment opportunities for the site when its existing lease expires, with a data centre expected to be built by 2033 or 2034 assuming non-renewal in five years’ time.
Though the proposed acquisition of the Tokyo site is expected to raise MIT’s gearing, the analyst believes proceeds from the trust’s recently resumed distribution reinvestment plan could reduce the gearing progressively.
“In our view, it’s more likely MIT could execute its divestment pipeline of S$200-400 million in the next 12 months, given a more favourable transaction market,” she said.
Li also likes MIT for its net property income yield of 4 per cent, which she highlighted will offer downside protection.
In the medium term, she expects portfolio reconstitution to gain further momentum and believes the trust is likely to see deals with “more interesting risk-return profiles”.
“Supported by falling interest rates, its sponsor and divestment pipeline, we expect more acquisitions with a stable income stream and growth potential,” said Li.
