Initiating on No-Moat Mapletree Industrial Trust With Exemplary Capital Allocation and SGD 2.52 FVE

We are initiating coverage on Mapletree Industrial Trust, or MIT, with a fair value estimate of SGD 2.52, and no moat and stable moat trend ratings. Our fair value estimate implies a forward distribution yield of 5.7% in fiscal 2023 (ending March) and price/book value of 1.4 times. In our view, one of the strongest attributes of the trust is its management, who we think are astute allocators of capital. Since its IPO, the trust’s management has demonstrated its exceptional investment decision-making by successfully growing the trust’s assets under management and distribution per unit via yield-accretive acquisitions, asset-enhancement initiatives, and redevelopment projects. Notably, the trust invested SGD 226 million to redevelop 1 and 1A Depot Close to a built-to-suit high-tech building from a flatted factory for Hewlett-Packard’s Asia headquarters in 2017. Since its completion, the property has recorded a fair value uplift and is currently valued at SGD 414 million as of March 31. With a sound balance sheet and unitholder-friendly distribution policy to add to its exceptional investment decision-making, we assign it an Exemplary capital allocation rating and expect management to continue creating value for unitholders. However, we think the trust is fairly valued at current prices and encourage investors to wait for a better entry point before adding this well-managed REIT.