Mapletree Logistics Trust (SGX:M44U), Singapore’s first Asia-Pacific focused logistics REIT, whose portfolio comprises 186 properties in Singapore, Australia, China, Hong Kong, India, Japan, Malaysia, South Korea, and Vietnam with a total assets under management of S$12.6bn as at 31 December 2022, have made available its financial results for the third quarter, as well as for the first 9 months of FY2022/23 after market hours yesterday (19 January 2023.)

The REIT is one of the few that have continued to provide an update of its full financial results on a quarterly basis despite not mandated to do so. On top of that, it is also one of the few that pays out a distribution (or dividend, but it is known as distribution for REITs) on a quarterly basis – which is something I like as a retail investor.

In this post, you’ll read about my review of its financial performance, portfolio occupancy and debt profile, along with its distribution payout to unitholders.

Let’s begin:

Financial Performance (Q3 FY2021/22 vs. Q3 FY2022/23, and 9M FY2021/22 vs. 9M FY2022/23)

In this section, you’ll find a comparison of the logistics REIT’s financial performance first on a quarter-on-quarter (q-o-q) basis (i.e. Q3 FY2021/22 vs. Q3 FY2022/23), and then on a year-on-year (y-o-y) basis (i.e. 9M FY2021/22 vs. 9M FY2022/23):

Q3 FY2021/22 vs. Q3 FY2022/23:

Q3 FY2021/22Q3 FY2022/23% Variance
Gross Revenue
(S$’mil)
$166.9m$180.2m+8.0%
Property Operating
Expenses (S$’mil)
$20.4m$23.0m+12.6%
Net Property
Income (S$’mil)
$146.4m$157.2m+7.3%
Distributable Income
to Unitholders
(S$’mil)
$96.7m$107.1m+10.8%

My Observations: On a q-o-q basis, I consider Mapletree Logistics Trust’s results a stable one.

The 8.0% and 7.3% improvements made in its gross revenue and net property income can be attributed to contributions from acquisitions from China, South Korea, Japan, Vietnam, Malaysia, Australia, and Singapore completed in Q1 FY2022/23 as well as in the previous financial year (i.e. FY2021/22), offset by the depreciation of the Japanese Yen, South Korean Won, Chinese Renminbi, and the Australian Dollar against the Singapore Dollar (however, the impact of currency fluctuations was partly mitigated through the use of foreign currency forward contracts to hedged the foreign-sourced income distributions.)

The 12.6% rise in property operating expenses was due to expenses incurred by the newly acquired properties (in Q1 FY2022/23, as well as in FY2021/22.)

9M FY2021/22 vs. 9M FY2022/23:

9M FY2021/229M FY2022/23% Variance
Gross Revenue
(S$’mil)
$495.7m$551.7m+11.3%
Property Operating
Expenses (S$’mil)
$60.6m$71.3m+17.6%
Net Property
Income (S$’mil)
$435.0m$480.4m+10.4%
Distributable Income
to Unitholders
(S$’mil)
$282.7m$323.7m+14.5%

My Observations: Just like the logistics REIT’s q-o-q results, its results for the first 9 months of FY2022/23 was also a pretty stable one – the double-digit percentage growth in its gross revenue and net property income can be attributed to double-digit percentage growth in its q-o-q results in Q1 (you can read my review about it here), as well as in Q2 (you can read my review about it here) – due to contributions from newly acquired properties in China, South Korea, Japan, Vietnam, Malaysia, Australia, and Singapore completed in Q1 FY2022/23, as well as in the whole of last financial year (i.e. FY2021/22), offset by just a single-digit percentage growth in Q3 (which I’ve reviewed moments earlier.)

However, improvements were offset by the depreciation of the Japanese Yen, Chinese Renminbi, South Korean Won, as well as the Australian Dollar against the Singapore Dollar – though the impact of currency fluctuations was partially mitigated through the use of foreign currency forward contracts to hedge the foreign-sourced income distributions.

Finally, the 17.6% rise in property operating expenses was due to property operating expenses incurred by the newly acquired properties. 

Portfolio Occupancy Profile (Q2 FY2022/23 vs. Q3 FY2022/23)

Moving on, let us take a look at the REIT’s portfolio occupancy profile – where I will be comparing the statistics for the current quarter under review (i.e. Q3 FY2022/23 ended 31 December 2022) against that recorded in the previous quarter 3 months ago (i.e. Q2 FY2022/23 ended 30 September 2022) to find out if it has continued to remain resilient (very much preferred), or showing signs of weakness:

Q2 FY2022/23Q3 FY2022/23
Portfolio Occupancy
(%)
96.4%96.9%
Rental Reversion
(%)
+3.5%+2.9%
Portfolio WALE
(by NLA – years)
3.3 years3.2 years

My Observations: In my opinion, Mapletree Logistics Trust’s portfolio occupancy profile continues to remain very strong – with its portfolio occupancy growing by another 0.5 percentage points (pp) to 96.9%, contributed by an improvement in the portfolio occupancy rates of its properties in Singapore (from 97.4% in Q2 FY2022/23 to 98.3% in Q3 FY2022/23), Japan (from 98.2% in Q2 FY2022/23 to 99.2% in Q3 FY2022/23), and China (from 92.4% in Q2 FY2022/23 to 93.3% in Q3 FY2022/23), offset by a slight dip in occupancy rate in Hong Kong (from 100.0% in Q2 FY2022/23 to 99.8% in Q3 FY2022/23) and South Korea (from 98.6% in Q2 FY2022/23 to 98.3% in Q3 FY2022/23.)

While rental reversion for new and/or renewed leases have fallen by 0.6pp compared to the previous quarter, but given the current economic condition, it is good to note that the REIT managed to record a positive rental reversion.

Finally, as far as lease expiries are concerned, only 7.5% of the leases will be expiring in the final quarter of the current financial year under review, 26.8% of the leases expiring in the next financial year 2023/24, 21.7% of the leases expiring in FY2024/25, and the remaining 44.0% of the leases expiring only in FY2025/26 and beyond.

Debt Profile (Q2 FY2022/23 vs. Q3 FY2022/23)

With a series of interest rate hikes announced by the US Federal Reserve last year, it is inevitable that REITs will be impacted to a certain extent (as borrowing costs will be increased when they refinance their borrowings.) However, those with a high percentage of borrowing hedged to fixed rates (upwards of 80%), as well as a low percentage of borrowings maturing over the next 2 years will be less affected than those that do not.

So, compared to the previous quarter (i.e. Q2 FY2022/23 ended 30 September 2022), how is Mapletree Logistics Trust’s debt profile like? Let us have a look at it in the table below:

Q2 FY2022/23Q3 FY2022/23
Aggregate Leverage
(%)
37.0%37.4%
Interest Coverage
Ratio (times)
4.6x4.3x
Average Term to
Debt Maturity (years)
3.6 years3.6 years
Average Cost of
Debt (%)
2.5%2.6%
% of Borrowings Hedged
to Fixed Rates (%)
82%83%

My Observations: Given the current rising interest rate environment, I am not surprised to see the REIT’s debt profile weaken compared to the previous quarter.

Despite of that, its aggregate leverage, at 37.4%, is still a safe distance away from the regulatory limit of 50.0%.

In terms of debt maturity, only 4% of the REIT’s borrowings will be expiring in the remaining quarter of FY2022/23, 13% of its borrowings will be expiring in the next financial year 2023/24 (there remains sufficient available committed credit facilities to refinance borrowings due in the remaining quarter of FY2022/23, and in the next financial year 2023/24), 9% of its borrowings will be expiring in FY2024/25, and the remaining 74% of the borrowings expiring only in FY2025/26 and beyond.

Finally, for those who would like to know the impact of rising interest rates on distribution payout to unitholders, every potential 25bps (basis points) increase in base rates may result in approximately S$0.52m drop in distributable income, or approximately 0.01 cents in DPU per quarter.

Distribution Payout to Unitholders

As mentioned in the beginning of this post, the management of Mapletree Logistics Trust declares a distribution payout to its unitholders on a quarterly basis – for the current quarter under review, a payout of 2.227 cents/unit was declared, which is a 1.9% increase from the distribution payout of 2.185 cents/unit declared in the same time period last year (i.e. Q3 FY2021/22.)

Together with its distribution payout of 2.268 cents/unit declared in the first quarter, and 2.248 cents/unit declared in the second quarter, the REIT have paid out a total of 6.743 cents/unit for the first 9 months of FY2022/23 – a 3.4% improvement from a payout of 6.519 cents/unit paid out in the first 9 months of FY2021/22.

If you are a unitholder of the logistics REIT, do take note of the following dates regarding its distribution payout:

Ex-Date: 30 January 2023
Record Date: 31 January 2023
Payout Date: 13 March 2023

Management’s Comments & Outlook (from the REIT’s Press Release)

Comments on the REIT’s Results for Q3 & 9M FY2022/23:

“While MLT has delivered another set of resilient results, we are now facing the headwinds from high interest costs and forex volatility. We will continue to implement prudent risk management strategies to navigate these challenges. In line with our portfolio rejuvenation strategy, we are divesting three properties in Singapore and Malaysia, which will provide us with greater financial flexibility to pursue investment opportunities of modern, high-specs assets.”

Outlook Ahead:

“The global economic outlook remains subdued amidst elevated inflation, rising interest rates and slowing growth. Logistics customers continue to be cautious and are more selective on asset quality and location. MLT’s portfolio of well-located properties and modern facilities has enabled the Trust to remain resilient and achieve a stable occupancy of 96.9%.

Approximately 83% of MLT’s total debt had been hedged into fixed rates and 79% of income stream for the next 12 months had been hedged into Singapore Dollar. Through proactive hedging, the negative impact of rising borrowing costs and the strength of the Singapore Dollar on MLT’s financial performance will be partially mitigated. As at 31 December 2022, MLT’s gearing stood at 37.4% with an average debt duration of 3.6 years.

The Manager remains focused on optimising portfolio performance and cost management, including the pursuit of value adding opportunities such as asset enhancements and divestments. The Manager will continue to evaluate and pursue growth opportunities to strengthen MLT’s portfolio.”

Closing Thoughts

On the whole, I am of the opinion that the REIT’s results is a stable one (as far as its financial performance, and portfolio occupancy profile are concerned.)

As for the slight weakening in its debt profile, it was very much within my expectations – however, headwinds by rising interest rate environment is very much mitigated in the near-term, firstly because the REIT have more than 80% of its borrowings hedged to fixed rates (which is one of the highest among the Singapore-listed REITs), and secondly, the REIT only had about 26% of borrowings expiring from now till the end of FY2024/25 (and personally, I expect interest rates to drop again by then.)

Another area is in the depreciation of currencies from other countries (which the REIT have properties in) against the Singapore Dollar potentially impacting the REIT’s distribution payout – I understand that about 79% of the amount distributable in the next 12 months has been hedged into/derived in Singapore Dollars – this is a pretty high percentage and certainly provides some stability in distribution payouts (from being affected by unfavourable currency fluctuations.)

With that, I have come to the end of my review of Mapletree Logistics Trust’s latest results for the third quarter, as well as for the first 9 months of the financial year ended 31 December 2022. As always, do note that all the opinions above are purely my own which I’m sharing for educational purposes only, and they do not serve as any buy or sell calls for units of the REIT. Please do your own due diligence before you make any investment decisions.

Related Documents

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

The 8th Edition of REITs Asia Pacific 2023: A half-day event on 16 March 2023 (Thursday) from 2.00pm - 5.00pm at Carlton Hotel Singapore. Panel discussions in this year's event will include (i) will Asian Logistics/Industrial REITs will continue to outperform in 2023; (ii) can Asia's REIT market thrive amid high rising inflation and higher interest rates; (iii) is this the best time to invest in technology in the REITs market; (iv) importance of ESG to the REITs market. Some of the participating S-REITs include BHG Retail REIT, Cromwell European REIT, IREIT Global, Lendlease Global Commercial REIT. To find out more about the event, and how you can attend, you can visit the organiser's (The Pinnacle Group International) website here...

The 8th Edition of REITs Asia Pacific 2023 - 16 March (2.00 to 5.00pm SGT)