This morning (14 September 2020), there was an article on The Edge Singapore that blue-chip REIT Mapletree Industrial Trust (SGX:ME8U) has announced the acquisition of a data centre and office located in Virginia, US.

Post-acquisition, data centres will comprise 34.7% of the REIT’s property portfolio (up from 32.0% as at 30 June 2020.) It was also reported that the acquisition was a yield-accretive one for the REIT (you can read the report in full from The Edge Singapore here.)

Prior to its latest acquisition, as at the end of the first quarter of financial year 2021 (the REIT has a financial year ending every 31 March), Mapletree Industrial Trust’s total assets under management was S$5.9b, with its portfolio comprising 87 properties across 44 clusters (13 hi-tech buildings, 23 flatted factories, 3 business park buildings, 1 stack-up/ramp-up buildings, and 4 light industrial buildings) in Singapore, along with 27 data centres in North America (through joint ventures with Mapletree Investments Pte Ltd.)

So, how has the REIT fared in-terms of its financial performance, debt and portfolio occupancy portfolio, as well as distribution payouts to unitholders over the years? In my post about the blue-chip REIT today, you will learn about its historical data between FY2015 and FY2020 (a total of 6 financial years), along with how it has fared in the first quarter of the financial year 2021 (ended 30 June 2020.)

Let’s begin…

Mapletree Industrial Trust’s Financial Performance between FY2015 and FY2020

The following table is the REIT’s gross revenue, net property income, and its distributable income to unitholders recorded over a 6-year period between FY2015 and FY2020:

FY2015FY2016FY2017FY2018FY2019FY2020
Gross
Revenue
(S$’mil)
$313.9m$331.6m$340.6m$363.2m$376.1m$405.9m
Net Property
Income
(S$’mil)
$228.6m$245.1m$256.8m$277.6m$287.8m$318.1m
Distributable
Income to
Unitholders
(S$’mil)
$180.8m$197.8m$205.0m$215.8m$231.8m$265.3m

Mapletree Industrial Trust's Gross Revenue, Net Property Income, and Distributable Income to Unitholders between FY2015 and FY2020

As you can see from the table and chart above, Mapletree Industrial Trust have seen its gross revenue, net property income, and distributable income to unitholders record year-on-year (y-o-y) growth over a 6-year period – with a compound annual growth rate (CAGR) by 4.4%, 5.7%, and 6.6% respectively – in my opinion, this is quite a feat for the blue-chip REIT.

Debt Profile of Mapletree Industrial Trust over a 6-Year Period

When I shortlist for companies to add to my long-term investment portfolio, apart from looking at its historical financial performance over the years, I also look at its debt profile (over the same time period) to make sure it does not take on too much debt (than it is able to.)

In this section, let us have a look at Mapletree Industrial Trust’s debt profile between FY2015 and FY2020:

FY2015FY2016FY2017FY2018FY2019FY2020
Gearing
Ratio (%)
30.6%28.2%29.2%33.1%33.8%37.6%
Interest
Coverage
Ratio (%)
8.0x8.0x7.7x6.7x6.5x7.7x
Average
Cost of
Debt (%)
2.3%2.5%2.7%2.9%3.0%2.9%
Average
Term to
Debt
Maturity (years)
3.7
years
2.7
years
3.5
years
3.3
years
4.4
years
4.7
years

My Observations:

  • Even though the REIT’s gearing ratio have been on a rise since FY2017, but even at 37.6% recorded in FY2019, it is still some distance away from the new regulatory limit of 50.0%, and this offers the REIT ample of debt headroom to make further yield-accretive acquisitions.
  • Interest coverage ratio, which measures how many times can a REIT cover its interest payments with its available earnings (I am looking at REITs that are able to maintain it at above 5.0x over the years), have been maintained at reasonably high levels, which is desirable.
  • Its average cost of debt have also been maintained at under 3.0% in all but one year.

Additionally, in terms of its debt maturity, only 7.0% of its debts will expire in the current FY2021/21 (at the time of writing), 15.6% in FY2021/22, 12.2% in FY2022/23. A huge majority of its debts will mature in FY2024/25, as well as in FY2025/26 – at 27.6% and 28.9% respectively.

Mapletree Industrial Trust’s Portfolio Occupancy Profile between FY2015 and FY2020

The following table shows you Mapletree Industrial Trust’s portfolio occupancy rate and its portfolio weighted average lease expiry (WALE) over a 6-year period:

FY2015FY2016FY2017FY2018FY2019FY2020
Portfolio
Occupancy
(%)
90.2%94.6%93.1%90.0%90.2%91.5%
Portfolio
WALE
(years)
3.1
years
2.8
years
3.1
years
3.8
years
3.6
years
4.2
years

Over the years, the REIT’s portfolio occupancy have been maintained at over 90.0%.

As at the end of FY2020 on 31 March 2020, the REIT’s top 10 tenants accounted for about 29.1% towards its overall gross revenue, with single tenant HP contributing the most at 8.0%, and the rest of its tenants contributing not more than 4.0%.

In my opinion, should HP decide not to renew its lease in the future, it might affect the REIT’s gross revenue to a certain extent.

Mapletree Industrial Trust’s Distribution Payout to Unitholders between FY2015 and FY2020

How has the blue-chip REIT been rewarding its unitholders over the years? Let us take a look at its distribution payout to unitholders between FY2015 and FY2020 in the table and chart below:

FY2015FY2016FY2017FY2018FY2019FY2020
Distribution
Per Unit
(S$’cents/unit)
10.43
cents
11.15
cents
11.39
cents
11.75
cents
12.16
cents
12.24
cents

Mapletree Industrial Trust's Distribution Per Unit to Unitholders between FY2015 and FY2020

The REIT is one that is still continuing to declare a distribution payout to its unitholders on a quarterly basis (it’s something I desire as well.) Over the past 6 financial years, its distribution payout to unitholders have grown every single year – from 10.43 cents/unit in FY2015 to 12.24 cents/unit in FY2020 – a CAGR of 2.7%.

Mapletree Industrial Trust’s Key Financial Results for Q1 FY2021 (vs. Q1 FY2020)

Finally, let us have a look at the REIT’s financial performance for the first quarter of the current financial year 2021 (period under review was between 01 April and 30 June 2020), compared against the same time period last year (i.e. Q1 FY2020.)

Many companies, as a result of the ongoing Covid-19 pandemic, saw their financial results weakened significantly compared to the previous year. Is Mapletree Industrial Trust’s results also negatively impacted by the pandemic?

Let us have a look at it in the table below:

Q1 FY2020Q1 FY2021% Variance
Gross
Revenue
(S$’mil)
$99.6m$99.1m-0.5%
Net Property
Income
(S$’mil)
$77.9m$78.7m+0.9%
Distributable
Income to
Unitholders
(S$’mil)
$63.2m$70.6m+11.6%
Distribution
Per Unit
(S$’cents/unit)
3.1
cents
2.87
cents
-7.4%

While the REIT’s gross revenue dropped 0.5% (or S$0.5m) y-o-y as a result of rental rebates extended to its tenants as part of the Covid-19 Assistance & Relief Programme, its distributable income to unitholders saw a 11.6% y-o-y improvement, which can be attributed to higher net property income and distribution declared by joint ventures.

However, as the REIT withheld S$7.1m of the distributable income to provide it with a greater financial flexibility, as well as to mitigate the impact of the mandated rental relief for its tenants, its distribution per unit for the quarter fell 7.4% y-o-y to 2.87 cents/unit (from 3.1 cents/unit declared in Q1 FY2020.) Without the withholding of the distributable income, the REIT’s distribution per unit would have been up 2.9% on a y-o-y basis to 3.19 cents/unit.

Personally, while the latest set of results was a mixed one for the REIT, but it is one of the better results I have seen among the S-REITs for the quarter ended 30 June 2020.

In Conclusion

The REIT is in my ‘shopping list’ for its resiliency in its financial performance over the years, along with a steadily rising distribution payout to its unitholders.

In my opinion, its debt profile over the years is also a conservative one. No doubt its latest quarterly results is somewhat a mixed one (with gross revenue down slightly but net property income and distributable income to unitholders up), but it is an encouraging one, especially when many of the S-REITs fared much worse as a result of the Covid-19 pandemic.

However, despite having said that, this post is by no means a recommendation to buy or sell REITs of Mapletree Industrial Trust. As always, please do your own due diligence before you make any investing decisions.

Disclaimer: At the time of writing, I am not a unitholder of Mapletree Industrial Trust.

 

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