Mapletree Industrial Trust (SGX:ME8U) is the second Mapletree REIT to release its financial results for the second quarter of the financial year 2020/21 ended 30 September 2021 after market hours yesterday (the first was Mapletree Logistics Trust on Monday evening, and you can find my review of its second quarter results here.)

Before I begin, a brief introduction about the REIT for those of you who may be unfamiliar with it – it is part of Singapore’s benchmark Straits Times Index since 22 June 2020 (replacing Singapore Press Holdings) and also, apart from a mix of industrial properties in its portfolio, it also has data centre properties (located in the United States of America) – so for investors who would like to invest in a REIT with data centre properties, yet at the same time have other types of properties in its portfolio, then this REIT is one to consider.

In this post, you’ll read about its latest financial performance, portfolio occupancy and debt profile, as well as its distribution payout to unitholders for the current quarter under review (these are the usual things I look out for whenever I review a company’s results), along with my personal opinion about its latest set of results as a unitholder to share…

Financial Performance (Q2 FY2020/21 vs. Q2 FY2021/22, and 1H FY2020/21 vs. 1H FY2021/22)

In this section, I’ll be looking at the blue-chip REIT’s financial performance both on a quarter-on-quarter (q-o-q), as well as on a year-on-year (y-o-y) basis:

Q2 FY2020/21 vs. Q2 FY2021/22:

Q2 FY2020/21Q2 FY2021/22% Variance
Gross Revenue
(S$’mil)
$103.4m$155.6m+50.5%
Property Operating
Expenses (S$’mil)
$21.7m$35.2m+62.0%
Net Property
Income (S$’mil)
$81.6m$120.3m+47.4%
Distributable Income
to Unitholders
(S$’mil)
$72.9m$88.4m+21.3%

On a q-o-q basis, the growth in its gross revenue and net property income is primarily due to contribution from the newly acquired properties (the 29 data centres located in the United States) in July 2021.

Also, the 62.0% q-o-q jump in its property operating expenses is due to expenses incurred from the acquisition of the 29 data centres in the United States, along with the consolidation of full period operating expenses from the 14 data centres previously held under MRDCT and the data centre at Richmond, Virginia (also in the United States.)

1H FY2020/21 vs. 1H FY2021/22:

1H FY2020/211H FY2021/22% Variance
Gross Revenue
(S$’mil)
$202.5m$283.6m+40.1%
Property Operating
Expenses (S$’mil)
$42.2m$58.6m+38.8%
Net Property
Income (S$’mil)
$160.3m$225.0m+40.4%
Distributable Income
to Unitholders
(S$’mil)
$143.4m$171.1m+19.3%

The resilient performance by the REIT for the first half of FY2021/22 compared to the same time period last year is largely due to the full half year revenue contribution from the 14 data centres previously held under MRDCT, data centre at Richmond, Virginia, and also revenue contribution from the newly acquired 29 data centres in the United States in July 2021, coupled with lower rental reliefs granted to eligible tenants.

Another thing about its latest y-o-y results to note is the 38.8% increase in its property operating expenses – this is due to the full period operating expenses of the 14 data centres previously held under MRDCT, the data centre at Richmond, Virginia, and operating expenses from the newly acquired 29 data centres in the United States.

Portfolio Occupancy Profile (Q1 FY2021/22 vs. Q2 FY2021/22)

Moving on, let us take a look at the REIT’s portfolio occupancy profile for the second quarter of FY2021/22 (ended 30 September 2021), compared against that recorded in the previous quarter (i.e. Q1 FY2021/22 ended 30 June 2021) to find out whether or not it has continued to remain resilient:

Q1 FY2021/22Q2 FY2021/22
Portfolio Occupancy
(%)
94.3%93.7%
WALE (by Gross Rental
Income – years)
3.7 years4.3 years

My Observations: Compared to the previous quarter, the REIT’s portfolio occupancy profile is a mixed bag – where its portfolio occupancy suffered from a slight 0.6 percentage point (pp) decline, but there were improvements in its weighted average lease expiry (or WALE.)

The dip in the REIT’s portfolio occupancy rate in the current quarter under review is due to a decline in the occupancy rates of its properties in North America. Looking at its occupancy rates on a segmental basis, slight decreases in occupancy rates are recorded in the following:

  • Data centres (from 98.3% in Q1 FY2021/22 to 94.5% in Q2 FY2021/22)
  • Hi-tech buildings (from 99.0% in Q1 FY2021/22 to 98.7% in Q2 FY2021/22)
  • Business park buildings (from 83.6% in Q1 FY2021/22 to 82.6% in Q2 FY2021/22)
  • Stack-up/Ramp-up buildings (from 96.9% in Q1 FY2021/22 to 96.4% in Q2 FY2021/22)

As far as the lease expiry is concerned, 5.9% of the leases will be expiring in the second half of the current financial year, and another 16.4% of the leases will be expiring next financial year (i.e. FY2022/23.)

Debt Profile (Q1 FY2021/22 vs. Q2 FY2021/22)

One of my key focus areas whenever I look at a REIT’s debt profile is its aggregate leverage (or gearing ratio as some would like to call it) to make sure it is not too high (personally, anything that’s close to 45.0% is concerned high), along with its interest coverage ratio (which measures the REIT’s ability to fulfil its short-term debt obligations) where personally, my preference is towards REITs that are able to maintain it at above 5.0x.

With that, let us take a look at Mapletree Industrial Trust’s debt profile as at the end of the second quarter on 30 September 2021, compared against that recorded in the previous quarter 3 months ago (i.e. Q1 FY2021/22 ended 30 June 2021) to find out whether or not it fulfils my criteria above:

Q1 FY2021/22Q2 FY2021/22
Aggregate Leverage
(%)
31.0%39.6%
Interest Coverage
Ratio (times)
6.8x6.7x
Average Term to
Debt Maturity (years)
2.8 years2.6 years
Average Cost of
Debt (%)
2.7%2.4%

My Observations: Apart from the 8.6pp increase in its aggregate leverage due to additional loans drawn to fund the US portfolio acquisition (which resulted in the REIT’s aggregate leverage for the current quarter under review to go up to 39.6%), all the other statistics that I usually focus my attention on saw improvements (which is good to note.)

As far as the REIT’s aggregate leverage is concerned, no doubt it has increased to 39.6% for the current quarter under review, but in my opinion, I do not feel it is overly high, and there still remain sufficient debt headroom for the REIT to embark on more yield-accretive acquisition activities before it reaches the regulatory limit of 50.0%.

On the REIT’s debt maturity ahead, it is pretty well spread out, with 14.6% (or $425.3m) of its total borrowings maturing in the second half of the current financial year 2021/22, 18.0% (or $522.1m) of its borrowings will be maturing in the following financial year 2022/23, 15.7% (or $457.3m) of its borrowings will be maturing in FY2023/24, 12.7% (or $368.2m) of its borrowings will be maturing in FY2024/25, and the remaining 39.0% (or $1,132.7m) of its borrowings will be maturing only in FY2025/26 and later.

Distribution Per Unit

The REIT is one of the few Singapore-listed REITs that have continued to declare a distribution payout to its unitholders on a quarterly basis.

For the current quarter under review, a distribution payout of 3.47 cents/unit was declared – a 11.9% increase from 3.10 cents/unit declared in the same time period last year.

Together with its 3.35 cents/unit payout in the first quarter of FY2021/22, its total distribution payout declared in the current financial year so far is 6.82 cents/unit, compared to 5.97 cents/unit paid out to unitholders in the same time period last financial year.

If you are a unitholder of the blue-chip industrial REIT, here are the important dates regarding its distribution payout to take note out:

Ex-Date: 02 November 2021
Record Date: 03 November 2021
Payout Date: 03 December 2021

Closing Thoughts

In my opinion, the blue-chip industrial REIT’s latest set of results is a pretty decent one – aided by contributions from the newly acquired data centres in the United States, its gross revenue, as well as its net property income went up by about 50.0% and 40.0% on a q-o-q, as well as on a y-o-y basis respectively. Along with improvements in the REIT’s financial results, its distribution payout to unitholders for the current quarter under review also saw a close to 12.0% improvement (to 3.47 cents/unit.)

The only slight negatives to note is its portfolio occupancy rate – which fell to 93.7% (compared to the previous quarter) due to lower occupancy rates of the newly acquired properties in the United States, and also in its aggregate leverage, where it went up to 39.6% (however, as I’ve mentioned earlier in this post, there still remains some debt headroom before the regulatory limit of 50.0% is reached.)

All in all, as a unitholder, you can say that I am satisfied with the REIT’s latest ‘report card.’

With that, I have come to the end of my review on Mapletree Industrial Trust’s latest results for the second quarter, as well as for the first half of the financial year 2021/22. Hope you’ve found the contents presented useful, and as always, please do your due diligence before you engage any investment decisions on the REIT (as the contents, along with my opinions above, are purely for educational purposes only, and they do not imply any buy or sell calls for the REIT’s units.)

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Disclaimer: At the time of writing, I am a unitholder of Mapletree Industrial Trust.

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