MINDSPACE BUSINESS PARKS REIT Stock Research Report by ICICI Securities
Sector: Construction – Real Estate
CMP Rs. 325, Target Rs. 364 (12% upside potential)
Target Period: 12 Months
MINDSPACE BUSINESS PARKS REIT Stock Research Report: Steady quarter, expiries the key monitorable
Mindspace Business Parks REIT (MREIT) delivered a steady performance in Q4FY23 with both revenue and NOI declining 1% QoQ to Rs5.4bn and Rs4.4bn, respectively. Overall portfolio occupancy as of Mar’23 was at 83.4% (decline of 30bps QoQ) with committed occupancy at 89.0% (up 70bps QoQ). The REIT manager has indicated that the estimated portfolio exits for FY24E as of Mar’23 now stand at 1.6msf vs. 0.8msf at the end of Dec’22. Accordingly, we now assume lower occupancies in Airoli, Mumbai and Hyderabad assets leading to our FY24/25E NOI estimates being cut by 7% and 5% respectively. We retain our ADD rating with a revised DCF based target price of Rs364/unit (earlier Rs367) based on Mar’23 NAV as we build in higher expiries in FY24 and cut our FY24E and FY25E DPU estimates by 9% and 5% to Rs19.2/unit and Rs21.5/unit, respectively. At CMP of Rs325/unit, we estimate NDCF yield of 5.9% in FY24E and 6.6% in FY25E, of which over 90% is estimated to consist of tax-free dividends. Key risks to our call are further rise in vacancies across assets and fall in lease rentals.
● Steady revenue and NOI traction: In Q4FY23, the REIT delivered revenue of Rs5.4bn which declined 1% QoQ while Q4FY23 NOI of Rs4.4bn declined 1% QoQ (adjusted for one time gain of Rs186mn in Q3FY23). Overall FY23 gross leasing stood at 4.1msf with 2.5msf of new and vacant area leasing along with 1.6msf of re-leasing. Overall portfolio occupancy as of Mar’23 was at 83.4% (decline of 30bps QoQ) with committed occupancy at 89.0% (up 70bps QoQ).
● Fresh exits for FY24 leads to cut in FY24/FY25E NOI/DPU estimates: While large leasing deals continue to see delays owing to global macro headwinds, the REIT\manager has indicated that the estimated portfolio exits for FY24E as of Mar’23 now stand at 1.6msf vs. 0.8msf at the end of Dec’22. Of the 1.8msf of FY24 exits, 0.5msf is in the Airoli East, Mumbai asset and 0.6msf in the Madhapur, Hyderabad asset. Also, given that vacant SEZ space of 1.6msf across the portfolio continues to pose a challenge (0.4msf of this is being converted to non-SEZ under existing regulations), we now assume lower occupancies in Airoli, Mumbai and Hyderabad assets leading to our FY24/25E NOI estimates being cut by 7% and 5% respectively. Consequently, we also cut our FY24E DPU estimate by 9% to Rs19.2/unit (flat YoY) and FY25E DPU estimate by 5% to Rs21.5/unit.
● Over 90% of FY24-25E distributions to be in the form of tax-free dividends: MREIT has declared a total NDCF distribution of Rs10.9bn or Rs18.45/unit in FY22, of which over 90% was in the form of tax-free dividends. In FY23, the REIT’s NDCF distribution stood at Rs11.3bn or Rs19.1/unit. At CMP of Rs325/unit, we estimate NDCF yield of 5.9% in FY24E and 6.6% in FY25E, of which over 90% of distribution is expected to be in the form of tax-free dividend + capital return.
To study next Research Analysis.. Click
To Study our Small Cap Calls… Click
For Mutual Fund Guidance, Click chanakyaMFguidance.com
https://www.analysislibrary.com/tvs-motor-company-stock-research-report/