Earlier this afternoon, blue-chip logistics REIT in Mapletree Logistics Trust (SGX:M44U), or MLT for short, held its 12th annual general meeting (AGM) for the financial year ended 31 March 2022 (i.e. FY2021/22.)
Unitholders have the choice to attend the meeting either physically or virtually – due to the resurgence in the number of Covid cases recently, I have opted to attend the meeting virtually.
For the benefit of those who aren’t able to attend, in this post, you can find my summary of the presentation by the CEO Ms Ng Kiat and CFO Ms Charmaine Lum, responses to questions posed by fellow AGM attendees (both in-person as well as online), along with results of the 3 resolutions put to vote during the meeting.
Presentation by Ms Ng Kiat and Ms Charmaine Lum
- As a result of S$1.8bn of acquisitions done in the financial year, along with about S$0.5bn of revaluation gains (largely attributable to properties in Australia, Hong Kong, and China), the REIT’s assets under management rose 21.1% on a year-on-year (y-o-y) basis to S$13.1bn, with gross floor area up by 21.5% in the same time period to 7.9m sqm.
- Portfolio occupancy remains healthy at 96.7%, with its lease-expiry well-staggered and a WALE (Weighted Average Lease Expiry) of 3.5 years by NLA (Net Lettable Area.)
- In terms of the REIT’s tenant base, they are strong and well-diversified, comprising 840 local and international companies; top 10 tenants account for approximately 24.2% of the REIT’s total gross revenue.
Delivering Returns to Unitholders:
- Amount distributable to unitholders raised by 17.3% y-o-y to S$390.7m, with distribution unit increasing by 5.5% y-o-y to 8.787 cents due to an enlarged portfolio, lower rental rebates granted to tenants, along with an increase in revenue contribution from existing tenants.
Prudent Capital Management:
- Aggregate leverage, as at 31 March 2022, stood at 36.8% (well-within regulatory levels), with interest coverage ratio at 5.0x (also well above the debt covenants.)
- S$534m, or 11% of the REIT’s total debt of about S$5bn, will be due in the coming financial year 2022/23, and Ms Lum shared that there is sufficient available committed credit facilities of S$921m to refinance.
- 79% of the REIT’s debt has been hedged or drawn into fixed rates (up from 75% in FY2020/21), and 76% of the REIT’s income has been hedged into / derived in the Singapore Dollars for the next 12 months to mitigate any potential risks.
- Ms Lum updated that REIT remains committed in its target to become carbon neutral in its operations by the year 2030.
- The following are a summary of some of the REIT’s green efforts for the financial year under review:
- Achieved a 6% y-o-y reduction in energy intensity in Singapore, Hong Kong, Vietnam, China, Malaysia, and Japan;
- Achieved a 31% y-o-y increase in solar generating capacity to 13.8MWp;
- Planted more than 1,000 trees across the REIT’s platform in FY2021/22;
- Secured S$800m of green financing to date, with proceeds to finance/refinance green energy projects, or fund green initiatives.
- Here are some of the REIT’s targets on its green efforts in the financial year ahead (i.e. FY2022/23):
- Establishing MLT’s Green Roadmap to a sustainable climate resilient portfolio, including plans for green building certifications and green leases (where the REIT will be introducing green leases to tenants in Singapore in FY2022/23);
- Reducing portfolio energy intensity for all of its assets with operational control by 1.0% to 1.5% in FY2022/23 from a FY2021/22 baseline (with their long-term target to reduce energy intensity by 20% in Singapore and Hong Kong by 2030 from FY2018/19 baseline);
- Increasing solar energy generating capacity across MLT’s portfolio by 15% to 20% in FY2022/23 from a FY2021/22 baseline (with their long-term target to double solar energy generating capacity across MLT’s platform by 2030 from FY2020/21 baseline.)
- From the anti-government protests in Hong Kong, Covid-19 pandemic, and the war in Ukraine disrupting supply chains, Ms Ng noted that tenants are now favouring smaller warehouses in multiple locations to better reach their customers in X-number of hours, and added that REIT is able to benefit from this trend due to it being in a network position (with warehouse properties located in multiple locations.)
- The REIT will continue to focus on its yield optimisation on existing portfolio (one example would be the redevelopment of 51 Benoi Road in Singapore which will see its gross floor area increase by 2.3 times following its completion in 3 years time), as well as prudent capital management strategy in the year ahead.
- At the same time, the REIT will be more aggressive in divesting assets with limited growth, and recycling the capital into acquiring smaller sites next to current warehouses and redeveloping them (one example being the acquisition of 2 parcels of leasehold industrial properties in Subang Jaya, Selangor Malaysia that was completed on 14 July 2022 – the properties are adjacent to the REIT’s existing Subang 3 and 4 properties and the amalgamation of these properties into an enlarged land site will see the gross floor area expand 5 folds, and as a result, enabling the REIT to realise greater value from the assets.)
Responses to Questions Posed by AGM Attendees
- On the recent lockdowns in China (due to their ‘Zero Covid’ policy), a unitholder wanted to know whether rental rebates are granted to affected tenants, and also the impact to the REIT’s revenue. To this, CFO Ms Charmaine Lum said while there were some rental rebates granted to tenants, but the amount was not significant. She also explained that as the REIT’s properties were spread out across the different parts of China, the impact was minimal as well (as the lockdown was limited to certain cities.)
- The same unitholder also wanted to know about the REIT’s long-term view of China, to which the REIT’s Chairman, Mr Lee Chong Kwee expressed his confidence in the future of the country because of the sheer magnitude of the country’s economy. He is of the opinion that in time to come, China will become the biggest economy in the world. With that in mind, he said that the country will remain a mainstay for the REIT.
- Given that interest rates are going up further in the near-future, a unitholder wanted to know if the REIT have plans to further hedge its borrowings at fixed rates. In response, Mr Lee said that currently, 79% of the REIT’s borrowings are hedged at fixed rates, and this gives it a reasonably good protection at least over the next few years. He added that it is not just about simply further hedging its borrowings into fixed rates, but also whether it makes sense to do so (as banks will likely quote unfavourable rates at this juncture, given the fact that interest rates will rise further.)
- With companies adopting a ‘China Plus One’ strategy (a business strategy where companies avoid having their supply chains only in China, but diversify into other countries), a unitholder asked if the REIT will be focusing more on markets outside of China. To this, Mr Lee said the REIT remains open to all potential acquisition opportunities, and is disciplined in acquiring properties that have good long-term prospects, as well as being DPU-accretive.
- In light of the rising energy costs, a unitholder wanted to know of its impact to the REIT. Ms Ng replied that for the REIT’s logistics warehouse businesses, energy costs are only limited to the common areas (such as lift lobbies and ramps), and the impact of rising energy costs to the REIT is minimal.
- A unitholder noted that Equinix, a data centre company, was one of the REIT’s top-10 tenants (with its contribution at 2.9% towards its total gross revenue), and wanted to know what kind of space was leased. In response, Ms Ng said that only the shell for warehouse was provided to the tenant, without any infrastructure. She shared that it is the same for coldstore operators.
Results of the 3 Resolutions Put to Vote during the AGM
- Resolution #1, which is to receive and adopt the Trustee’s Report, the Manager’s Statement, the Audited Financial Statements of MLT for the financial year ended 31 March 2022 and the Auditor’s Report thereon, was passed with 98.07% of the votes for, and 1.93% of the votes against.
- Resolution #2, which is to re-appoint PricewaterhouseCoopers LLP as the Auditor of MLT and to authorise the Manager to fix the Auditor’s renumeration, wad passed with 98.44% of the votes for, and 1.56% of the votes against.
- Resolution #3, which is to authorise the Manager to issue Units to make or grant instruments convertible into Units, was passed with 93.47% of the votes for, and 6.53% of the votes against.
Disclaimer: At the time of writing, I am a unitholder of Mapletree Logistics Trust.
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