Mapletree Industrial Trust’s Q2 Fiscal 2023 In Line but DPU Disappoints

No-moat Mapletree Industrial Trust’s, or MIT’s, second-quarter fiscal 2023 (ending March) results were largely in line with our expectations. Second-quarter fiscal 2023 gross revenue and net property income improved 12.8% and 8.3% year on year to SGD 175.5 million and SGD 130.3 million, respectively. However, distribution per unit, or DPU, fell 3.2% year on year to SGD 0.0336 due to an enlarged unit base and higher borrowing costs. Our fiscal 2023 DPU forecast is lowered to SGD 0.1402 from SGD 0.1440, translating to a fiscal 2023 dividend yield of 6.2%, after fine-tuning our model to factor in a higher near-term cost of debt. This is slightly offset by a distribution top-up of SGD 6.6 million that management plans to release over the next three quarters. Our fair value estimate of SGD 2.52 per unit remains unchanged and we think the trust is slightly undervalued with upside of 12%. We continue to like the trust for its strong sponsor and portfolio of data centers that benefits from strong secular growth trends such as cloud computing, artificial intelligence, 5G, and other technological advancements driving the data center sector.