Following the conclusion of the financial year 2021/22 on 31 March 2022, blue-chip logistics REIT in Mapletree Logistics Trust (SGX:M44U) released its annual report, along with details of its upcoming annual general meeting (AGM) early this morning (27 June 2022.)

As a unitholder of the REIT, I have studied the report with interest to keep abreast of its latest developments and for the benefit of those who do not have time to go through it, here’s a summary of the most important points to take note of, along with details about its upcoming AGM.

Let’s begin:

Summary of Annual Report

Overview of FY2021/22:

  • While most economies had a promising start to the year and were on the cusp of a sustained recovery from the pandemic-induced recession, their collective progress was hindered in the latter half of the year with the emergence of numerous challenges on the global front. Despite of the headwinds, the logistics sector continued to stay resilient.
  • In the financial year, the REIT grew its regional footprint into new geographical sub-markets and built depth in existing markets to meet the warehousing needs of their tenants – particularly, they have announced the acquisition of 23 properties valued at S$1.9bn in FY2021/22, of which 20 with an aggregate value of S$1.8bn were completed by March 2022.
    • 17 of the properties (comprising of modern Grade-A logistics facilities across China, Vietnam, and Malaysia, located near to transportation hubs and in close proximity to large consumer markets) were acquired from its Sponsor, Mapletree Investments Pte Ltd;
    • 6 of the properties were executed with third-parties – similar in profile to the properties acquired from its Sponsor, those assets (located in Australia, Japan, Malaysia, Singapore, and South Korea) enjoy strong locations in thriving logistics hubs with good access to transportation infrastructure and city areas.

Impact of Covid-19 on the REIT’s Operations:

  • Even though each of the 9 operating markets had several rounds of intermittent tightening of Covid-19 measures to combat rising infections, but the operations of the REIT’s tenants were not materially impacted, as logistics was deemed to be an essential service and most of their tenants were allowed to continue operating even at the height of the pandemic.

Key Financial Results:

  • Gross revenue and net property income saw a year-on-year (y-o-y) growth of 20.9% (to S$678.6m) and 18.6% (to $592.1m) respectively, mainly due to an enlarged portfolio, higher contribution from existing assets, and lower rental rebates granted to eligible tenants impacted by Covid-19.
  • As a result of an improved performance in its gross revenue and net property income, the REIT’s distributable income increased by 17.3% in the same time period to S$390.7m, with Distribution Per Unit (DPU) risen by 5.5% to 8.787 cents after accounting for an enlarged unit base.

Portfolio Performance:

  • Mapletree Logistics Trust’s portfolio continued to benefit from healthy customer demand for modern warehouse space while proving resilient to the impacts of the pandemic, with its overall occupancy holding steady throughout the financial year under review, where it ended the year at 96.7%.
  • The REIT’s leases have a weighted average lease term of 2.2 years (by revenue), with its top 10 customers contributing 24.2% towards its gross revenue.
  • Its portfolio have achieved an overall weighted average positive rental reversion of +2.5% in FY2021/22, with individual market rental reversions ranging from 1.2% to 5.0% across the 9 operating markets.

Capital Management:

  • In December 2021, the REIT have completed an equity fund raising exercise (to partially finance the acquisitions in China, Vietnam, and Japan) which was over-subscribed and well-received by investors. In aggregate, approximately S$692.8m was raised through a combination of preferential offering and a private placement.
  • The REIT also issued S$400m of perpetual securities at a coupon rate of 3.725% per annum, with the proceeds raised deployed to finance the redemption of its existing S$250m perpetual securities which had a higher coupon rate of 4.18% per annum, as well as other committed acquisitions.
  • Despite the significant investments made during the year, the REIT have closed the year with a gearing ratio of 36.8% – well below the aggregate leverage limit of 50.0% set by the Monetary Authority of Singapore; this provides the REIT with ample debt headroom to take advantage of investment opportunities as they arise.
  • Weighted average annualised interest rate is maintained at 2.2% per annum, with 79% of its total debt hedged or drawn in fixed rates as at 31 March 2022 and an interest coverage ratio of 5.0x.
  • Finally, the REIT has sufficient available committed credit facilities of S$921m to refinance S$534m (or 11% of its total debt) due in the coming financial year FY2022/23.

Environmental, Social and Governance (ESG) Efforts:

  • Continuing its work to build the climate resilience of its portfolio and reduce their emissions profile, during the financial year, the REIT have increased the solar generating capacity of their portfolio by 31%, and reduced energy intensity by 6.2% on a y-o-y basis, along with planting 1,000 indigenous trees across the REIT’s platform.
  • On the governance front, the REIT is also the first listed company on the Singapore Exchange to roll out a hybrid-format general meeting incorporating investor friendly features of live voting and live Q&A at its Extraordinary General Meeting (EGM) in January 2022 – a testament to their commitment to continually elevate the level of their engagement with unitholders.
  • In the year ahead, the REIT will be working together with its Sponsor to formulate policies on sustainable investment, development, operations and renewable energy, as well as developing a green roadmap for Mapletree Logistics Trust – all these will be defined by its sustainable strategy which seeks to achieve net zero ambitions over the long-term.

Outlook Ahead:

  • The global economic outlook has weakened significantly since the start of 2022 (with the International Monetary Fund revising its 2022 global growth forecast from 4.4% to 3.6%, due to a confluence of multiple negative factors, including rising interest rates, persistent supply chain disruptions, intensifying inflationary pressure, and repercussions from the Russian invasion of Ukraine.) However, the REIT’s management is of the opinion that Asia Pacific logistics property industry’s strong fundamentals are remains intact, and its long-term prospects continue to be promising.
  • Additionally, the structural drivers of demand in the logistics sector such as e-commerce growth and supply chain diversification (which have been amplified by the pandemic), will continue to underpin occupier demand.
  • Another thing to note is that the Russia-Ukraine war will add further impetus to the need for supply chain security and near-shoring of manufacturing bases, which will likely stimulate demand for Grade-A logistics space in alternative manufacturing hubs in Southeast Asia and India, as well as the established industrial zones in North Asia. This, coupled with a limited supply, will bring about a greater demand-supply imbalance for this highly desired asset class – which is something Mapletree Logistics Trust (with a pan-Asia presence and a portfolio of high quality and well-located assets) is well-positioned to benefit from.
  • However, while being cautiously optimistic on the outlook of the logistics industry, the REIT’s management are also mindful of the imminent threats that loom on the horizon, which may impact near-term economic growth and demand for logistics space.

Details of Mapletree Logistics Trust’s Upcoming AGM

The REIT will be conducting its upcoming AGM on Monday, 18 July 2022, at 2.30pm.

Unitholders have the option to attend the meeting physically (at 20 Pasir Panjang Road, Mapletree Business City, Town Hall – Auditorium, Singapore 117439), or virtually, and you can sign up via the following link (do take note that the deadline to do so will be on Friday, 15 July 2022, at 2.30pm):

In view of the climbing case counts as far as Covid-19 is concerned, I have decided to attend the meeting virtually this time round. For the benefit of those who aren’t able to attend, as usual, I will publish a summary of it in due course.

Closing Thoughts

Personally, I share the views of the management as far as the outlook of the REIT is concerned – where the REIT will be in a good position to tap on the strong demand for Grade-A logistics space in the countries which it has a business presence in; on the other hand, the weak economic outlook may impact the growth and demand for logistics space.

Another area to highlight is the impact of rising interest rates on the REIT – with a huge bulk of its borrowings (79%) on fixed rates, my opinion is that it will be minimal.

With that, I have come to the end of my summary of Mapletree Logistics Trust’s latest annual report for the financial year 2021/22 ended 31 March 2022. Do take note that everything you’ve just read above is purely for educational purposes only, and they do not imply and buy or sell calls for the REIT’s units. As always, please do your own due diligence before you make any investment decisions.

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

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