On 25 January 2024, Mapletree Industrial Trust (“MIT”) have announced their third quarter results for FY2024. Overall the fundamentals have remained relatively stable, although borrowing costs continue to decrease their profits. Nonetheless with the recent decrease in share price, they may look more attractive than before for investors. Keep in mind as well that their financial year 31 March 2024 is closing soon over the next few months. We will be able to lookout for any potential adjustments to the valuations of their properties.
Website: Financial Statements And Related Announcement::Third 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 | -1.7% | -1.2% |
DPU for the 9 months ending 31 December 2023 decreased by 1.7% to SGD0.101 per share compared to SGD0.102 per share for the same period of the prior year. This was due to an increase in borrowing costs while net property income remained relatively the same. This metric is Unfavorable.
Occupancy
| Metrics | Current | Previous |
|---|---|---|
| Occupancy | 92.6% | 93.2% |
Occupancy rate as at 31 December 2023 have decreased to 92.6%. This metric is Unfavorable as it is slightly below my expected healthy occupancy rate of 95%.
Gearing ratio
| Metrics | Current | Previous |
|---|---|---|
| Gearing Ratio | 38.6% | 37.9% |
Gearing ratio have increased to 38.6% as at 31 December 2023, notably due to a net drawdown of bank loans this quarter. This to me is Neutral, as while it is a distance away from the MAS limit of 50%, the increase puts it close to the 40% mark. There may be revaluation updates over the next few months as MIT closes their financial year.
Interest coverage
| Metrics | Current | Previous |
|---|---|---|
| Interest Coverage | 4.2x | 4.3x |
The adjusted interest coverage for the trailing 12 months stands at 4.2 times as at 31 December 2023. This is Favorable in my opinion as the coverage ratio is above my preferred coverage of 3.0 times.
The Federal Reserve on 13 February 2024 have indicated that interest rates may need to stay high for a longer period as they are waiting for more evidence of easing price pressures before they cut interest rates, after a government report on Tuesday showed consumer inflation stayed elevated last month. This was after increasing the interest rates to a range between 5.25% and 5.50% on 26 July 2023.
Website: Fed seen waiting longer to cut rates as inflation stays elevated
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 1.5%. 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 | -$700 | -0.8% |
| + 100 bps | -$1,400 | -1.5% |
| + 150 bps | -$2,200 | -2.3% |
Debt maturity profile
| Metrics | Current | Previous |
|---|---|---|
| Debt Maturity Profile | 3.4 years | 3.3 years |
Weighted average term to maturity of their debt stands at 3.4 years on 31 December 2023. This is Favorable and it allows them sufficient time to refinance their debts as they fall due.
Price to Book Ratio
| Metrics | Current | Previous |
|---|---|---|
| Price to Book Ratio | 1.22 | 1.31 |
The Price to Book (“P/B”) ratio currently stands at 1.22. This is computed using the closing share price of SGD2.26 on 5 March 2024 and the net asset value per share of SGD1.85 as at 31 December 2023. The P/B ratio is on a higher side compared to other REITs. The metric is Neutral.
Dividend yield
| Year | Yield | Total |
|---|---|---|
| 2024 | 1.49% | SGD 0.034 |
| 2023 | 5.94% | SGD 0.134 |
| 2022 | 6.12% | SGD 0.138 |
| 2021 | 5.93% | SGD 0.134 |
| 2020 | 5.39% | SGD 0.122 |
| 2019 | 5.34% | SGD 0.121 |
With the payout in March 2024, the total expected dividend payout in the calendar year 2024 is likely to be similar to 2023. With the closing share price of SGD2.26 as at 5 March 2024, this translates to a dividend yield of 5.94%. For my benchmark, a general reasonable range would be around an average of 5.25% to 6.25%. The dividend yield is thus Favorable.
Website: Reasonable Dividend Yield 2024Q1
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 at 31 December 2023 accounted for only 28.7% of MIT’s portfolio with no single tenant accounting for more than 6.0% during the period, providing income diversity to the portfolio.
Summary
| Metrics | Financials | Rating |
|---|---|---|
| Distribution Per Unit | -1.7% | Unfavorable |
| Occupancy | 92.6% | Unfavorable |
| Gearing Ratio | 38.6% | Neutral |
| Interest Coverage | 4.2x | Favorable |
| Debt Maturity Profile | 3.4 years | Favorable |
| Price to Book Ratio | 1.22 | Neutral |
| Overall | | Neutral |
Overall, the metrics indicate that it is neutral to invest in MIT. Whilst there were changes to the ratings, this is mainly due to the numbers were at the borderline of my benchmarks. Their fundamentals have remained relatively stable, and the recent share price is likely due to the drop in the broader market. Given MIT 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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