Mapletree Industrial Trust (“MIT”) have announced their results on 28 October 2022. Although the DPU have dropped due to dilution, the results on surface look like a solid set of numbers, with the overall amount available for distribution to unitholders have improved slightly despite the uncertainty of macro-conditions. I have compiled the other key aspects of the REIT below and everything seem to be in good order.
Website: Financial Statements and Related Announcement::Second Quarter and/or Half Yearly Results
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.
On 21 April 2022, Mapletree Singapore Industrial Trust (“MSIT”), a wholly-owned subsidiary of MIT, completed the divestment of investment property at 19 Changi South Street 1, Singapore at a sale price of SGD13.0 million.
On 9 June 2022, MIT through its wholly-owned subsidiary, completed the divestment of 19675 West Ten Mile Road, Southfield, Michigan located in United States of America at a sale price of USD10.0 million.
Following completion of the above mentioned divestments, MIT’s property portfolio comprised 85 properties in Singapore and 56 properties in North America (including 13 data centres held through the joint venture with MIPL).
As at 30 September 2022, MIT’s total assets under management was SGD8.9 billion.
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”)
Based on the announcement on 26 October 2022, DPU decrease by 3.2% although revenue have increased by 12.8% as compared to the first half of 2022.
The decrease was due to increase in number of units in issue by 1.67% when compared to as at 30 September 2021, whereas the amount available for distribution to unitholders for 1H2023 only increased by 0.7%. This metric is Unfavorable as MIT have diluted the existing shareholders resulting in a fall in DPU.
Occupancy
Occupancy rate as at 30 September 2022 stands at a total of 95.6% as compared to 95.3% at 30 June 2022. This is contributed by an overall improvement in occupancy for all their asset. This metric is Favorable as it is above my expected healthy occupancy rate of 95%.
Gearing ratio
Gearing ratio stands at 37.8% as at 30 September 2022, a drop from 38.4% as at 30 June 2022 . This to me is Favorable, as it is a distance away from the MAS limit of 50% and also provides adequate headroom for MIT to leverage on debt should there be an accretive acquisition in the short term.
Interest coverage
The interest coverage for the trailing 12 months stands at 5.8 times as at 30 September 2022 respectively. This is Favorable in my opinion but similar to the other REITs, there is a need to keep an eye out for increasing interest rates with recent fears of inflation resulted in the United States (“US”) playing with the idea of increasing interest rates to combat inflation. Something that investors should take note of.
Website: Fed Seen Aggressively Hiking to 5%, Triggering Global Recession
Debt maturity profile
Weighted average term to maturity of their debt stands at 3.5 years on 30 September 2022 as compared to 3.7 years at 30 June 2022. This is Favorable and it allows them sufficient time to refinance their debts as they fall due.
Price to Book Ratio
The Price to Book (“P/B”) ratio currently stands at 1.12. This is computed using the closing share price of SGD2.17 on 4 November 2022 and the net asset value per share of SGD1.93 as at 30 September 2022. The P/B ratio is still on a higher side compared to other REITs although it has fallen significantly over the last few months. The metric is Neutral.
Dividend yield
At 4 November 2022, with a closing share price of SGD2.17 and dividend payout of SGD0.138 for the full calendar year 2022, this translates to a dividend yield of 6.37%, an increase from the previous calendar year. For my REIT’s benchmark, a general reasonable range would be around an average of 4.5%. The dividend yield is thus Favorable.
However, interest rates have been continuously increasing the last few months. This have prompted for multiple safer assets to increase their bond and interest rates to more than 3%. This causes the previous yields of MIT to become unfavorable, and MIT saw a decrease in their share price from SGD2.63 in my last article on 23 August 2022 to SGD2.17 on 4 November 2022 to provide higher dividend yields.
Website: Reasonable Dividend Yield Changes
If using dividend yield of 7% as a benchmark, based on the dividend of SGD0.138 there is potential for MIT to see its share price drop by another 9.2% to SGD1.97. Investors will thus need to be mentally prepared that the share price might further fall to these levels as interest rates for safe assets in Singapore approaches to cross 4%.
The current dividend yield of 6.37% is thus Neutral.
Other metrics
Tenant profile
MIT has an enlarged portfolio covering multiple trade sectors. The high quality and diverse tenant base provides resilience to the MIT portfolio across challenging events, as evidenced during the ongoing COVID-19 pandemic. The top-10 tenants accounted for only 29.7% of MIT’s portfolio with no single tenant accounting for more than 6.0% during the period, providing income diversity to the portfolio.
Summary
Overall, the metrics indicate that it is favorable to invest in MIT. Despite the drop in share price over the last few months, the fundamentals of MIT did not worsen during this quarter although some dilution was noted. This suggests that the current share price is due to overall market sentiment, especially as safe assets have seen their yield rise considerably with rising interest rates.
The recent market conditions present opportunities for entry as the share price continues to face downward pressure, but it is possible for the share price to recover should interest rates decrease over the next few years.
The above are a brief summary and thoughts of MIT. Admittedly still a work in progress as I refined on more things to add. For some more detail analysis, can check out the article written by REIT-TIREMENT.
Website: Mapletree Industrial Trust Review @ 28 October 2022
Not financial advice.
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