On 25 July 2024, Mapletree Industrial Trust (“MIT”) have announced their first quarter results for FY2025. There were no significant changes this quarter, though it is worth nothing that they have made a net divestment gain of SGD13.4 million from disposal of 115A & 115B Commonwealth Drive (the “Tanglin Halt Cluster”). They will be distributing this over the next four quarters to smoothen their DPU trend. With the relative stability of the REIT, this should provide investors with some assurance that they will be able to ride out any uncertainties.
Website: Financial Statements And Related Announcement::First Quarter Results
Photo source: https://fifthperson.com/2021-mapletree-industrial-trust-agm/
Background
MIT is a real estate investment trust listed on the Main Board of Singapore Exchange. The principal activity of MIT and its subsidiaries (the “Group”) is to invest in income-producing real estate used primarily for industrial purposes in Singapore and as data centres worldwide beyond Singapore, as well as real estate-related assets, with the primary objective of achieving sustainable returns from rental income and long-term capital growth.
MIT’s property portfolio includes Data Centres (Singapore), Data Centres (North America), Hi-Tech Buildings, Business Park Buildings, Flatted Factories, Stack-up/Ramp-up Buildings and Light Industrial Buildings.
MIT’s property portfolio comprised properties in Singapore and North America (including data centres held through the joint venture with MIPL).
MIT’s distribution policy is to distribute at least 90.0% of its taxable income, comprising substantially rental income from the letting of its properties and related property services income after deduction of allowable expenses, as well as interest income from the periodic placement of cash surpluses in bank deposits.
MIT is managed by Mapletree Industrial Trust Management Ltd. and sponsored by Mapletree Investments Pte Ltd.
Key Metrics
Distribution Per Unit (“DPU”)
| Metrics | Current | Previous |
|---|---|---|
| Distribution Per Unit | +1.2% | -1.0% |
DPU for the quarter ending 30 June 2024 increased by 1.2% to SGD0.0343 per share compared to SGD0.0339 per share in the previous financial year. This was mainly due to an increase in net property income while borrowing costs remained relatively constant. Due to the larger unit base however, this DPU decrease is lower as the amount available for distribution to unitholders saw an increase by 3.7%.
It was noted as well although DPU increased by 2.1% when comparing quarter on quarter, it was supported mainly by a net divestment gain of SGD13.4 million which will be distributed over the 4 quarters of FY2025. This provides some DPU stability, though the disposal of the property would also mean less recurring income moving forward. Nonetheless, this metric is Favorable.
Occupancy
| Metrics | Current | Previous |
|---|---|---|
| Occupancy | 91.9% | 91.4% |
Occupancy rate as of 30 June 2024 have increased slightly to 91.9%. This metric remains Unfavorable as it is below my expected healthy occupancy rate of 95%.
Gearing ratio
| Metrics | Current | Previous |
|---|---|---|
| Gearing Ratio | 39.1% | 38.7% |
Gearing ratio increased slightly to 39.1% as of 30 June 2024. This to me remains Neutral, unchanged from previous quarter.
Interest coverage
| Metrics | Current | Previous |
|---|---|---|
| Interest Coverage | 4.3x | 4.3x |
The adjusted interest coverage for the trailing 12 months remains unchanged at 4.3 times as of 30 June 2024. This metric remains Favorable in my opinion as the coverage ratio is above my preferred coverage of 3.0 times. This metric is likely to improve further moving forward.
Debt maturity profile
| Metrics | Current | Previous |
|---|---|---|
| Debt Maturity Profile | 3.6 years | 3.8 years |
Weighted average term to maturity of their debt shortened to 3.6 years as of 30 June 2024. This metric remains Favorable as there is sufficient time to refinance their debts as they fall due.
Price to Book Ratio
| Metrics | Current | Previous |
|---|---|---|
| Price to Book Ratio | 1.30 | 1.29 |
The Price to Book (“P/B”) ratio currently stands at 1.30. This is computed using the closing share price of SGD2.27 on 26 July 2024 and the net asset value per share of SGD1.75 as of 30 June 2024. The P/B ratio is on a higher side compared to other REITs and investors will be paying a significant premium. The metric is Unfavorable.
Dividend
| Year | Yield | Total |
|---|---|---|
| 2024 | 4.47% | SGD 0.102 |
| 2023 | 5.92% | SGD 0.134 |
| 2022 | 6.09% | SGD 0.138 |
| 2021 | 5.90% | SGD 0.134 |
| 2020 | 5.37% | SGD 0.122 |
| 2019 | 5.32% | SGD 0.121 |
With the payout in the first 9 months of the calendar year 2024, the total expected dividend payout for 2024 is likely to be similar to 2023. With the closing share price of SGD2.27 as of 26 July 2024, this translates to a dividend yield of 5.92%. For my benchmark, a general reasonable yield would be around 5.75%. The dividend yield is therefore Favorable.
Website: Reasonable Dividend Yield 2024Q3 – 5.75%
Interest Rate Sensitivity
The economic data has shown stability over the last few months. This gives the Federal Reserve more incentive to lower interest rate after increasing the interest rates to a range between 5.25% and 5.50% on 26 July 2023.
Website: Fed seen holding rates steady in July, start cuts in Sept
MIT have provided the interest rate sensitivity analysis as below. Should the interest rate increase by another 1.0%, using distribution per quarter as a base, distribution is expected to decrease by 1.2%. Together with other cost pressures, DPU may be negatively affected moving forward and investors should keep a keen eye out for the interest coverage.
| Change in Interest Rates | Impact on amount available for distribution per quarter (SGD’000) | Impact on DPU (%) |
|---|---|---|
| + 50 bps | -$600 | -0.6% |
| + 100 bps | -$1,200 | -1.2% |
| + 150 bps | -$1,700 | -1.8% |
Other metrics
Tenant profile
MIT has an enlarged portfolio covering multiple trade sectors, with a well-diversified tenant profile of over 2,000 tenants and the top 10 customers as of 30 June 2024 accounted for 30.4% of MIT’s portfolio with no single tenant accounting for more than 5.9% during the period, providing income diversity to the portfolio.
Summary
| Metrics | Financials | Rating |
|---|---|---|
| Distribution Per Unit | +1.2% | Favorable |
| Occupancy | 91.9% | Unfavorable |
| Gearing Ratio | 39.1% | Neutral |
| Interest Coverage | 4.3x | Favorable |
| Debt Maturity Profile | 3.6 years | Favorable |
| Price to Book Ratio | 1.30 | Unfavorable |
| Overall | Neutral |
The overall metrics indicate that it remains Neutral to invest in MIT. MIT has remained relatively stable, though it continues to manage their DPU using divestments to smoothen the trend. Given MIT’s stable track record, it should provide some ease to investors that the REIT will be able to ride out the uncertainties ahead.
Disclaimer: Not financial advice. All data and information provided on this site is for informational purposes only.
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Website: Mapletree Industrial Trust (SGX: ME8U): 2024 Full Year Result
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