Mapletree Industrial Trust private placement 3.1 times subscribed at S$2.696

MAPLETREE Industrial Trust (MIT)'s private placement of 190.3 million new units was fixed at the top end of the price range, and was around 3.1 times covered, its manager said on Friday.

Most of the proceeds raised with this private placement, as well as a preferential offering, will be used to partially finance MIT's intended US$1.32 billion acquisition of 29 data centres in the United States, as announced on Thursday.

The private placement's issue price was fixed at the top end of the price range at S$2.696 per new unit. This represents a discount of 2.3 per cent to the volume-weighted average price (VWAP) of S$2.7596 per unit for trades done on Wednesday, the last trading day before the underwriting agreement was signed.

New units from the private placement are expected to be issued on or around June 1.

Meanwhile, the issue price for MIT's non-renounceable preferential offering has been fixed at S$2.64 per new unit (see amendment note). This represents a 4.3 per cent discount to the trust's VWAP of S$2.7596 per unit for trades done on Wednesday.

A further 117.6 million new units will be issued under the preferential offering at an allotment ratio of five new units for every 100 existing units.

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Total gross proceeds from the equity fund raising will amount to an estimated $823.3 million, said the manager, comprising S$512.9 million from the private placement and S$310.4 million from the preferential offering.

About 88.2 per cent or S$726.5 million of the total gross proceeds will be used to partially finance MIT's intended US$1.32 billion acquisition of 29 data centres in the US.

Another 7.6 per cent of the gross proceeds or S$62.2 million will be used to repay MIT's debt.

The rest will go towards fees and expenses incurred from the fundraising exercise, as well as to fund future acquisitions or for general working capital purposes.

The manager expects the total acquisition cost for the data centres to be about US$1.35 billion, including fees and expenses of about US$25.1 million, which it plans to finance through proceeds from the equity fundraising as well as debt.

DBS, OCBC, Merrill Lynch (Singapore) and UBS's Singapore branch were the joint global coordinators and bookrunners for the equity fundraising.

To ensure fairness to holders of existing MIT units, an advanced distribution will be paid for the period from April 1 to just before the placement units are issued. This is to ensure that distributions for the period go only to existing unitholders.

The distribution amount is estimated to range between 2.11 and 2.31 Singapore cents. MIT's manager said it will make a further announcement on the actual quantum of the advanced distribution in due course.

Maybank Kim Eng (Maybank KE) intends to revise its estimates for MIT following disclosure of the acquisition's completion, which is targeted to take place in Q3 of 2021. The research house currently has an unchanged "buy" call and S$3.25 price target for the Reit.

In a report issued on Thursday, Maybank KE's Chua Su Tye said he foresees further distribution per unit (DPU) accretive deals as MIT's management advances its diversification efforts to deepen its data centre contribution.

He estimates the trust's proposed acquisition to boost its data centre segment's contribution to 54 per cent of MIT's assets under management from 41 per cent previously, while strengthening DPU visibility from a longer 4.6-year weighted average leasehold expiry from four years.

CGS-CIMB has left its FY2022 to FY2024 DPU estimates for MIT unchanged pending completion of the acquisition. Its "add" call and target price of S$3.05 remain intact.

In a Thursday note, analyst Lock Mun Yee noted that the trust's net property income has potential to increase when occupancy at the target acquisition's largest asset, 250 Williams Street in Atlanta, improves.

"Post-acquisition and after factoring in the recent perpetuals issuance, we estimate gearing would be 40.3 per cent, still within the guideline," she said.

Separately, Lim & Tan Securities is advising an "accumulate on weakness" rating on the Reit while recommending that investors subscribe for MIT's one-for-one rights issue at S$2.64 each.

The research house's target price remains unchanged at S$2.76.

"We like MIT's increased exposure to a fast-growing asset class in the USA, exposed to remote working, e-commerce and the digitisation of the US economy. We also like that the acquisition is both DPU and net asset value accretive to MIT's unitholders," said the Lim & Tan research team in a note on Friday.

Units of MIT ended S$0.03 or 1.1 per cent higher at S$2.79 on Friday, after the announcement.

Amendment note: An earlier version of this article incorrectly stated that the issue price for MIT's non-renounceable preferential offering has been fixed at S$2.65 per new unit. It is in fact S$2.64. The article above has been revised to reflect this.