Mapletree Logistics Trust (SGX:M44U), Singapore’s first Asia-focused logistics REIT whose portfolio (at the time of writing) comprises a total of 186 properties in Singapore, Hong Kong, China, Japan, South Korea, Australia, Malaysia, Vietnam, and India and a total assets under management of S$12.9bn . The REIT is also a constituent of Singapore’s benchmark Straits Times Index (STI) since 23 December 2019.

The blue-chip logistics REIT is the first of the trio of Mapletree REITs to release its financial results for the second quarter, as well as for the first half of the financial year 2022/23 ended 30 September 2022 after market hours in the evening (25 October 2022), with Mapletree Industrial Trust releasing its results tomorrow (26 October), and Mapletree Pan Asia Commercial Trust releasing its results the day after (27 October.)

In this post, you’ll find key aspects (along with my review) about the REIT’s latest set of financial results, portfolio occupancy and debt profile, as well as its distribution payout to unitholders for the current quarter under review to take note of.

Let’s begin:

Financial Results (Q2 FY2021/22 vs. Q2 FY2022/23, and 1H FY2021/22 vs. 1H FY2022/23)

In this section, you’ll find a review of the logistics REIT’s results both on a quarter-on-quarter (i.e. Q2 FY2021/22 vs. Q2 FY2022/23), as well as on a year-on-year (i.e. 1H FY2021/22 vs. 1H FY2022/23) basis:

Q2 FY2021/22 vs. Q2 FY2022/23:

Q2 FY2021/22Q2 FY2022/23% Variance
Gross Revenue
(S$’mil)
$165.1m$183.9m+11.4%
Property Operating
Expenses (S$’mil)
$20.6m$23.9m+15.7%
Net Property
Income (S$’mil)
$144.4m$160.0m+10.8%
Distributable Income
to Unitholders
(S$’mil)
$93.4m$108.0m+15.6%

My Observations: On the whole, it was a decent set of financial results reported by the blue-chip logistics REIT – the 11.4% quarter-on-quarter (q-o-q) growth in its gross revenue was mainly due to higher revenue from existing properties, as well as from newly acquired properties in China, South Korea, Japan, Vietnam, Malaysia, Australia, and Singapore (completed in the previous financial year 2021/22 as well as in Q1 FY2022/23.) However, this was moderated by the depreciation of mainly Japanese Yen and Korean Won against the Singapore Dollar (but the impact of currency fluctuations is partially mitigated through the use of foreign currency forward contracts to hedge the foreign-sourced income distributions.)

As the result of the above, and also a 15.7% q-o-q increase in property operating expenses (mainly due to property operating expenses by the newly acquired properties completed in Q1 FY2022/23, and higher allowance for doubtful receivables), its net property income grew at a smaller percentage of 10.8%.

1H FY2021/22 vs. 1H FY20221/23:

1H FY2021/221H FY2022/23% Variance
Gross Revenue
(S$’mil)
$328.8m$371.5m+13.0%
Property Operating
Expenses (S$’mil)
$40.2m$48.3m+20.1%
Net Property
Income (S$’mil)
$288.6m$323.2m+12.0%
Distributable Income
to Unitholders
(S$’mil)
$186.1m$216.6m+16.4%

My Observations: Similar to its q-o-q results, the logistics REIT’s results for the first half of the current financial year under review (compared to the same time period last year) also saw its gross revenue and net property income growing by double-digit percentages – and as a unitholder, I’m satisfied with it.

The 13.0% improvement in its gross revenue was due to higher revenue from existing properties, along with revenue coming from newly acquired properties in China, South Korea, Japan, Vietnam, Malaysia, Australia, and Singapore completed in the previous financial year 2021/22, as well as in the first quarter of FY2022/23. However, the growth was offset by the depreciation of mainly Japanese Yen, Korean Won, and Australian Dollar against the Singapore Dollar (however, impact of currency fluctuations is partially mitigated through the use of foreign currency forward contracts to hedge the foreign-sourced income distributions.)

With property operating expenses rising by 20.1% (due to property operating expenses incurred by the newly acquired properties in FY2021/22, as well as in Q1 FY2022/23, and higher allowance for doubtful receivables), its net property income saw a smaller clip of growth at 12.0% – but in my opinion its still considered decent.

Portfolio Occupancy Profile (Q1 FY2022/23 vs. Q2 FY2022/23)

Next, let us take a look at the REIT’s portfolio occupancy profile, where you’ll find a comparison of the stats recorded for current quarter under review (i.e. Q2 FY2022/23 ended 30 September 2022) against that recorded in the previous quarter 3 months ago (i.e. Q1 FY2022/23 ended 30 June 2022) to find out whether it has continued to remain resilient:

Q1 FY2022/23Q2 FY2022/23
Portfolio Occupancy
(%)
96.8%96.4%
Rental Reversion
(%)
+3.4%+3.5%
Portfolio WALE (by Net
Lettable Area – years)
3.4 years3.3 years

My Observations: Compared against the previous quarter, the REIT’s portfolio occupancy profile was a bit of a “mixed bag” – the 0.4 percentage point (pp) decline in its portfolio occupancy was due to lower occupancy rates in Singapore (from 98.3% in Q1 FY2022/23 to 97.4% in Q2 FY2022/23), Japan (from 99.2% in Q1 FY2022/23 to 98.2% in Q2 FY2022/23), as well as from China (from 92.9% in Q1 FY2022/23 to 92.4% in Q2 FY2022/23), offset by higher occupancy rates in South Korea (from 98.0% in Q1 FY2022/23 to 98.6% in Q2 FY2022/23), and in Malaysia (from 99.1% in Q1 FY2022/23 to 99.7% in Q2 FY2022/23.) Its properties in Hong Kong, Vietnam, Australia, and India are 100.0% occupied.

Lease expiries, despite seeing a slight dip, but it is still well-staggered over the next couple of years – with 16.3% of the leases expiring in the 2nd half of FY2022/23, 25.1% of the leases expiring in FY2023/24, 20.0% of the leases expiring in FY2024/25, and the remaining 38.6% of the leases expiring only in FY2025/26 and beyond.

Finally, top 10 customers account for approximately 22.7% of the REIT’s total gross revenue, with no tenant contributing more than 4.4% towards its total gross revenue.

Personally, I find the REIT’s portfolio occupancy profile to be very strong, as occupancy rates of properties in all the geographical locations are maintained at above 90.0%, and lease expiries very well-staggered over the years. Best of all, it still managed to improve on its rental reversion (by 0.1pp to 3.5% in Q2 FY2022/23) despite the economic headwinds.

Debt Profile (Q1 FY2022/23 vs. Q2 FY2022/23)

Just like how I have reviewed the REIT’s portfolio occupancy profile in the previous section, I will also be reviewing its debt profile by comparing the stats reported for the current quarter under review against that reported in the previous quarter 3 months ago, as follows:

Q1 FY2022/23Q2 FY2022/23
Aggregate Leverage
(%)
37.2%37.0%
Interest Coverage
Ratio (times)
4.8x4.6x
Average Term to
Debt Maturity (years)
3.7 years3.6 years
Average Cost
of Debt (%)
2.3%2.5%
% of Borrowings Hedged
to Fixed Rates (%)
80%82%

My Observations: Just like its portfolio occupancy profile in the previous section, its debt profile for the current quarter under review (compared against the previous quarter) was once again a mixed bag.

What is good to note is that, its aggregate leverage managed to see a slight 0.2pp decline to 37.0% (and at this percentage, it is still a good distance away from the regulatory limit of 50.0%.) Also, the REIT has managed to hedge another 2% of its borrowings to fixed rates (and at 82%, it is considered to be very high already) – in case you’re wondering, every potential 25 bps increase in base rates may result in approximately S$0.56m decline in its distributable income, or approximately S$0.01 cents/unit per quarter.

On the other hand, its interest coverage ratio fell slightly to 4.6x, and average cost of debt went up by 0.2pp to 2.5%.

As far as debt maturities are concerned, 7% of its borrowings are due for refinancing in the second half of FY2022/23 (that said, there remains sufficient available credit facilities of S$923m to refinance the debt), 11% of its borrowings due for refinancing in FY2023/24, 14% of its borrowings due for refinancing in FY2024/25, and the remaining 68% of its borrowings maturing in FY2025/26 and beyond.

Distribution Payout to Unitholders

The management of Mapletree Logistics Trust declares a distribution payout to its unitholders on a quarterly basis (which is something I like) – for the current quarter under review (i.e. Q2 FY2022/23), a distribution payout of 2.248 cents/unit was declared – a 3.5% increase from the distribution payout of 2.173 cents/unit declared in the same time period last year (i.e. Q2 FY2021/22.)

If you are a unitholder of the blue-chip logistics REIT, here are some important dates about its payout to take note of:

Ex-Date: 01 November 2022
Record Date: 02 November 2022
Payout Date: 13 December 2022

Together with the payout of 2.268 cents/unit declared in Q1 FY2022/23, on a year-on-year basis, the REIT’s distribution payout amounts to 4.516 cents/unit – again, this is a 4.2% improvement compared to the distribution payout of 4.334 cents/unit declared last year (i.e. 1H FY2021/22.)

Management’s Comments and Outlook [from its Press Release]

“The global economic outlook continues to weaken amidst high inflation, rising interest rates and ongoing geopolitical tensions.

Overall leasing demand in MLT’s markets has remained resilient, supporting stable occupancy and rental rates. However, higher interest rates and depreciation in regional currencies against the Singapore Dollar have negatively affected MLT’s distributable income, the impact of which is partially mitigated by our hedging programme. Given the continued rise in interest rates and strength of the Singapore Dollar, it is expected that these headwinds will continue to have a negative effect on MLT’s financial performance in the near term.

The Manager will remain vigilant and continues to adopt a proactive capital management approach. Approximately 82% of MLT’s total debt has been hedged into fixed rates, while around 72% of income stream for the next 12 months has been hedged into Singapore Dollar. As at 30 September 2022, MLT has a gearing ratio of 37.0%. The maturity dates of the borrowings are well-spread with an average debt duration of 3.6 years.

The Manager continues to focus on maintaining stable occupancies and cost containment, while actively pursuing recycling opportunities for selective divestments as well as DPU-accretive acquisitions and asset enhancements to enhance portfolio competitiveness and create value.”

Closing Thoughts

While there are some slight negatives as far as its portfolio occupancy and debt profile are concerned, but on the whole, I’m satisfied with the blue-chip logistics REIT’s latest set of financial results – for the former, occupancy rates for its properties in all geographical locations are maintained at above 90.0%, and leases expiries well-spread out. Most importantly, I’m impressed to see the REIT improving on its rental reversion compared to the previous quarter (from 3.4% in Q1 FY2022/23 to 3.5% in Q2 FY2022/23); for the latter, aggregate leverage (at 37.0%) is still a good distance away from the 50.0% regulatory limit. Also, the REIT have hedged 82% of its borrowings to fixed rates, hence providing some form of “protection” against interest rate hikes.

Last but not least, I’m sure you’ll agree with me the financial results reported by the REIT both on a q-o-q, as well as on a y-o-y basis, is quite stable. The same can also be said for its distribution payout for the current quarter under review.

With that, I have come to the end of my review of Mapletree Logistics Trust’s latest results for the second quarter of FY2022/23. As always, I do hope you’ve found the contents above useful, and take note that all of the opinions above are solely mine for educational purposes only. They do not imply any buy or sell calls for the REIT’s units. You’re strongly encouraged to 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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