Earlier this afternoon, Mapletree Logistics Trust (SGX:M44U) held its 14th annual general meeting (AGM) for the financial year ended 31 March 2023 (i.e., FY2022/23), where I have attended virtually.

As a virtual attendee, not only was I able to cast my votes ‘live’, I was also allowed to ask any questions I have via the text box provided – I applaud the REIT for continuing to make these options available.

For the benefit of those who are not able to attend the meeting, in this post, you can read about my summary of the presentation by CEO Ng Kiat and CFO Charmaine Lum, responses to questions raised by fellow AGM attendees (both in-person, as well as virtually), as well as results of the 3 resolutions put to vote during the meeting.

Let’s begin:

Presentation by Ms Ng and Ms Lum

Financial Performance:

• Despite a turbulent and challenging year brought about by geopolitical tensions, high interest rate environment, and the weakening of foreign currencies against a strong Singapore Dollar, the amount distributable to unitholders still managed to improve by 10.8% on a year-on-year (y-o-y) basis to S$432.9m, due to better performances in its existing properties, and incremental contributions from accretive acquisitions.
• After accounting for a larger unit base, Distribution Per Unit (or DPU) rose by 2.5% y-o-y to 9.011 cents.

Capital Management:

• Strengthened balance sheet with S$200m raised in equity fund raising at a unit price that is at the top-end of the range to partially finance acquisitions of 8 modern logistics facilities in Japan (6), Sydney, Australia (1), and in Seoul, South Korea (1), where acquisitions were completed in Q1 FY2023/24 – the properties have young modern specifications, and leased to reputable blue-chip customers.
• Prudent capital management by the REIT’s management saw its aggregate leverage maintained at a healthy level at 36.8%, and an interest coverage ratio of 4.0x, well above debt covenants.
• Only 8%, or S$374m of debt will due in FY2023/24, and there is sufficient committed facilities of S$1,161m available for refinancing. Debt maturity profile remains well-staggered with an average debt duration of 3.8 years.
• 84% of total debt is hedged to fixed rates, and for the remaining 16% of unhedged debt, every potential 25bps increase in base rates may result in ~$0.49m decrease in distributable income, or ~0.01 cents in DPU per quarter.
• With about 70% of income coming from properties overseas, the REIT may be impacted by weak regional foreign currencies against the Singapore Dollar. To mitigate, it has entered into forward contracts progressively to hedge income into Singapore Dollar (SGD). Currently, about 77% of the amount distributable in the next 12 months has been hedged into/derived in SGD.

Portfolio Performance:

• ~70% of the REIT’s total assets under management are in developed markets, offering stability, with ~45% of revenue contributed by tenants with leases in multiple locations.
• The REIT’s 185 properties across 9 markets (52 in Singapore, 13 in Australia, 43 in China, 9 in Hong Kong, 2 in India, 19 in Japan, 17 in Malaysia, 20 in South Korea, and 10 in Vietnam) are valued at ~S$12.8bn, a slight decline from ~S$13.1bn recorded last year due to weaker Chinese Renminbi, Japanese Yen, Korean Won, and Australian Dollar against the Singapore Dollar.
• Tenant base well-diversified, comprising 887 local and international companies, with top 10 tenants accounting for ~23.5% of its total revenue, and no one single tenant contributing more than 4.4%, providing income diversity.
• Portfolio occupancy healthy and stable across all 9 markets, with all of them having occupancy rates of above 98% except for China – due to an increase in supply of warehousing space, and tenants in the country prefer shorter leases due to uncertainties in the economy; that said, occupancy rate remains stable at 93.4%.
• Portfolio rejuvenation efforts:
  • Accretive acquisitions: 8 modern logistics properties in Australia, Japan, and South Korea completed in Q1 FY2023/24
  • Redevelopment: 51 Benoi Road in Singapore into a modern ramp-up facility which will see its gross floor area increase by 2.3x; expected completion will be in Q1 2025
  • Divestments: 3 Changi South Lane, Singapore at a 39.2% premium to valuation completed in 31 March 2023, Chee Wah, Subang 1 in Malaysia at a 6.1% premium to valuation completed in 10 July 2023 (former), and 13 July 2023 (latter)

Sustainability Efforts:

• Mapletree Logistics Trust commits to achieve carbon neutrality for Scope 1 and 2 emissions by 2030, in-line with Mapletree Group’s long-term target of net-zero emissions by 2050.
• Some of the progresses made on the sustainability front include: Green leases implemented for all new and renewed leases in Singapore since the launch of the initiative in FY2022/23, green certified space (by GFA) increased by 295% y-o-y to 1.7m sqm (accounting to 22% of the REIT’s portfolio), achieved 6% reduction in portfolio energy intensity from FY2021/22 baseline (long-term target is to reduce energy intensity by 20% in Singapore and Hong Kong by 2030 from FY2018/19 baseline), solar generating capacity increased by 163% y-o-y to 36.3MWp (long-term target is to expand REIT’s total solar energy generating capacity to 100MWp by 2030).
• To help finance the initiatives, the REIT have procured S$332m in green and sustainability linked loans in FY2022/23.

Looking Ahead:

• Ms Ng shared that by the end of the year, the REIT aims to divest S$1bn of assets and channel the capital into modern Grade A properties.
• Asia is expected to remain as a key market for growth in the logistics sector.
• Tenants continue to transition from ‘just-in-time’ to ‘just-in-case’ to have logistics spaces in multiple geographies to mitigate risks related to lockdowns (like what we have seen during the Covid pandemic back in 2020), and natural disasters.
• REIT well-equipped to cater to needs of tenants in terms of warehouse specifications, and renting of warehouse spaces in multiple locations.
• Geopolitical tensions between the China and the United States have seen companies shifting their operations to other locations – such as Samsung to Vietnam, and Apple to India – and Mapletree Logistics Trust can benefit from this, as it has properties in these countries.

Responses to Questions Raised by AGM Attendees

• Some unitholders have voiced their concerns about the growth prospects of China and Hong Kong. On the former, Mr Lee shared that despite of the geopolitical tensions between China and the United States, trade volume have continued to grow. Also, the tenants of properties in China are very domestic-focused in e-commerce and manufacturing sectors. He cautioned against withdrawing from the country as the move will risk the REIT becoming lopsided. On the latter, Mr Lee shared that the country is one of the top sea and air freight markets, and that Hong Kong is the only country (out of the 8 other countries overseas the REIT have properties in) that saw its currency appreciate against the Singapore Dollar in the financial year under review.
• Given the current high interest rate and expansion of cap rates (a market’s way of saying that the risk of purchasing an asset is rising), a unitholder asked how the REIT’s management can navigate through it and at the same time, maximising returns. In response, Ms Ng said the REIT will continue with its portfolio rejuvenation and rebalancing efforts – for instance, they will look to divest properties with a 2.5% cap rate, and reinvest in properties with a 4.5% cap rate.
• On how the REIT will manage hedging policies effectively in a volatile environment, Ms Lum said for overseas investments, the REIT will try to secure borrowings in the same currency as the underlying asset – and this will provide a natural hedge.
• Given the economic headwinds, a unitholder wanted to know if there are any ‘stress tests’ done against bank covenants. Mr Lee Joo Boon, the REIT’s AC Chairman, said the REIT conducts audit meetings regularly to review its capital to make sure they remain in a healthy position. He added that the REIT’s interest coverage ratio at 4.0x (as at 31 March 2023) suggests that it is able to to withstand the turbulence in the market. To this, Ms Lum also added that the REIT’s current gearing (at 36.8%) and interest coverage ratio are well-within limits set by the Monetary Authority of Singapore (MAS).
• With interest rates near to its peak, a unitholder asked if the REIT will reduce the percentage of its debt hedged to fixed rate. In response, Ms Lum said the REIT will continue to maintain a level of 75% – 85% of borrowings hedged to fixed rates.

Results of 3 Resolutions Put to Vote during the AGM

• Resolution 1, which is receive and adopt the Trustee’s Report, the Manager’s Statement, the Audited Financial Statements of MLT for the financial year ended 31 March 2023 and the Auditor’s Report thereon, was passed with 97.86% of the votes for, and 2.14% 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 remuneration, was passed with 98.31% of the votes for, and 1.69% of the votes against.
• Resolution 3, which is to authorise the Manager to issue Units and to make or grant convertible instruments, was passed with 92.78% of the votes for, and 7.22% of the votes against.

Related Documents

• AGM Presentation Slides
• Responses to Questions Submitted by Unitholders before the AGM

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

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