Listed on the Main Board of the Singapore Exchange on 28 July 2005, Mapletree Logistics Trust (SGX:M44U) was the first Asia-focused logistics REIT in the country.

As the name suggests, it invests in a diversified portfolio of income producing logistics properties. At the time of writing, its portfolio comprises 189 properties in Singapore, Australia, China, Hong Kong, India, Japan, Australia, South Korea, and Vietnam with a total assets under management of S$13.3 billion.

Last evening (24 October), the REIT was the first of the trio of Mapletree REITs to release its results for the 2nd quarter, and for the 1st half of FY2023/24 ended 30 September – with Mapletree Industrial Trust releasing its results later this evening (25 October), and Mapletree Pan Asia Commercial Trust releasing its results after market hours tomorrow (26 October).

In this post, you will find my review of Mapletree Logistics Trust’s latest financial results, portfolio occupancy and debt profile, as well as its distribution payout to unitholders.

Let’s begin…

Financial Results (Q2 FY2022/23 vs. Q2 FY2023/24, and 1H FY2022/23 vs. 1H FY2023/24)

In this section, I will be looking at the logistics REIT’s financial results recorded for the 2nd quarter (i.e., Q2 FY2022/23 vs. Q2 FY2023/24), followed by its results recorded for the 1st half of the financial year (i.e., 1H FY2022/23 vs. 1H FY2023/24):

Q2 FY2022/23 vs. Q2 FY2023/24:

Q2 FY2022/23Q2 FY2023/24% Variance
Gross Revenue
(S$’mil)
$183.9m$186.7m+1.5%
Property Operating
Expenses (S$’mil)
$23.9m$24.7m+3.6%
Net Property
Income (S$’mil)
$160.0m$162.0m+1.2%
Distributable Income
to Unitholders (S$’mil)
$108.0m$112.5m+4.2%

My Observations: Considering headwinds faced by all the REITs at the moment, including higher energy and borrowing costs, along with weaker foreign currencies against the strong Singapore Dollar (on this front, I note that the REIT have 80% of foreign income hedged for the next 12 months, giving it a good protection against foreign currency fluctuations), the REIT’s latest financial results for the 2nd quarter is a good one in my opinion.

The 1.5% growth in its gross revenue can be attributed higher contribution from existing properties mainly in Singapore and Hong Kong, along with contributions from newly acquired properties in Japan, South Korea, and Australia completed in Q1 FY2023/24, partly offset by lower contribution from existing properties in China, as well as loss of revenue from divested properties and property under redevelopment.

As a result of a higher percentage increase in property operating expenses (by 3.6%, mainly due to expenses incurred by the newly acquired properties, and increase in property tax) compared to the percentage increase in gross revenue (by 1.5%), its net property income recorded just a 1.2% gain.

However, distributable income to unitholders still managed to grow at 4.2% as a result of $8.8m of divestment gain.

1H FY2022/23 vs. 1H FY2023/24:

1H FY2022/231H FY2023/24% Variance
Gross Revenue
(S$’mil)
$371.5m$368.9m-0.7%
Property Operating
Expenses (S$’mil)
$48.3m$48.8m+1.0%
Net Property
Income (S$’mil)
$323.2m$320.1m-1.0%
Distributable Income
to Unitholders (S$’mil)
$216.6m$224.5m+3.6%

My Observations: The logistics REIT’s results for the first half of FY2023/24 was a mixed one, largely due to a weaker gross revenue and net property income recorded in the 1st quarter (where it fell by 2.9% and 3.1% respectively.)

Gross revenue for 1H FY2023/24 edged down by 0.7% compared to last year mainly due to a loss of revenue from divested properties, properties under redevelopment, and lower contribution from existing properties in China. However, this was moderated by higher contribution from existing properties, mainly in Singapore and Hong Kong, and contribution from newly acquired properties in Japan, South Korea, and Australia completed in Q1 FY2023/24.

As a result of a higher percentage increase in property operating expenses (which increased by +1.0%, from operating expenses incurred from the newly acquired properties, and higher property tax), its net property income fell by 1.0%.

Portfolio Occupancy Profile (Q1 FY2023/24 vs. Q2 FY2023/24)

One of the things I like about Mapletree Logistics Trust (hence my investment in it) was its strong occupancy rate – where it has been maintained at about 90% over the years.

Has the logistics REIT’s portfolio occupancy profile continued to remain resilient in the current quarter under review (i.e., Q2 FY2023/24 ended 30 September 2023)? Let us have a look at it in the table below, where you will find a comparison of its portfolio occupancy profile recorded for the current quarter under review, against that recorded in the previous quarter 3 months ago (i.e., Q1 FY2023/24 ended 30 June 2023):

Q1 FY2023/24Q2 FY2023/24
Portfolio Occupancy
(%)
97.1%96.9%
Rental Reversion
(%)
+4.2%+0.2%
Portfolio WALE
(by NLA – years)
3.1 years3.0 years

My Observations: Portfolio occupancy dipped slightly (by 0.2pp) due to a dip in occupancy rates in Japan (from 100.0% in Q1 FY2023/24 to 98.9% Q2 FY2023/24), South Korea (from 98.4% in Q1 FY2023/24 to 98.2% in Q2 FY2024), as well as in China (from 93.4% in Q1 FY2023/24 to 93.0% in Q2 FY2023/24) – despite of that, its portfolio occupancy continues to remain very healthy, where, apart from China (where its occupancy rate was at 93.0%), occupancy rates of properties in the other geographical locations are all above 98.0%.

On its rental reversion, at portfolio level, it was at +0.2%. However, if China was excluded (where it registered a negative rental reversion of -8.6% due to weakness in Tier-2 cities), it was at an impressive +9.1% (due to positive rental reversions across the markets ranging from +3.2% in Malaysia to +16.5% in Hong Kong.)

As far as its lease expiries are concerned, they are also well-spread out over the years – with an average of about 15% of leases due for renewal in any given financial year.

Debt Profile (Q1 FY2023/24 vs. Q2 FY2023/24)

Mapletree Logistics Trust is also one of the Singapore-listed REITs with a healthy debt profile (where its aggregate leverage have been maintained at under 40.0%, and a high percentage of borrowings hedged at fixed rates – hence providing some ‘cushion’ from the high interest rate environment we are in at the moment).

Similar to how I have reviewed the REIT’s portfolio occupancy in the previous section, in the table below, you will also find a comparison of its debt profile for the current quarter under review (i.e., Q2 FY2023/24 ended 30 September) against that recorded in the previous quarter (i.e., Q1 FY2023/24 ended 30 June):

Q1 FY2023/24Q2 FY2023/24
Aggregate Leverage
(%)
39.5%38.9%
Interest Coverage
Ratio (times)
3.9x3.8x
Average Term to
Debt Maturity (years)
3.8 years3.8 years
Average Cost of
Debt (%)
2.5%2.5%
% of Borrowings Hedged
to Fixed Rates (%)
82%83%

My Observations: On the whole, the REIT’s debt profile remains very healthy.

The 0.6pp improvement in aggregate leverage to 38.9% can be attributed to a lower total debt outstanding due to a repayment of loans using net proceeds from the divestment of properties in Japan, Malaysia, and Singapore.

It’s also good to note that the REIT have further increased its percentage of borrowings hedged to fixed rates by another percentage point to 83% – for the remaining 17% of the unhedged borrowings, every potential 25 bps increase in base rates may result in approximately S$0.6m decrease in distributable income, or -0.01 cents in DPU per quarter.

Finally, on the REIT’s borrowings due for refinancing ahead, just 4% (or S$198m) of borrowings will be due for refinancing in the 2nd half of the current financial year ahead, 10% of borrowings due for refinancing in FY2024/25, 16% of borrowings due for refinancing in FY2025/26, and the remaining 70% of borrowings due for refinancing only in FY2026/27 or later – on average, the REIT have about 10+% of borrowings due for refinancing in a single financial year, and I consider it to be very well-spread out.

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. In fact, all 3 Mapletree REITs have a quarterly distribution payout frequency.

For the current quarter under review (i.e., Q2 FY2023/24), a payout of 2.268 cents/unit was declared – compared to the payout of 2.248 cents/unit in the same time period last year (i.e., Q2 FY2022/23), this represented a slight 0.9% improvement – the reason why the percentage growth in its distribution per unit was much lesser compared to the percentage growth in the distributable income to unitholders was due to an enlarged unit base.

Together with the payout of 2.271 cents/unit declared in the first quarter, for the first half of the current financial year, the REIT’s distribution payout amounts to 4.539 cents/unit – a 0.5% improvement compared to its payout of 4.516 cents/unit in the same time period last year.

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

Ex-Date: 31 October 2023
Record Date: 01 November 2023
Payout Date: 19 December 2023

Also, unitholders have the option to receive their distribution in units of the REIT, a combination of units of the REIT and cash, or just cash (which is the default option). If your units are in the CDP account, you will receive more information about it in writing in due course. However, if your units are in a custodian account, you will receive a notification from your brokerage.

CEO Ms Ng Kiat’s Comments and Outlook (from the REIT’s Press Release)

“The geopolitical and economic environment remains challenging. At the operational level, our diversified portfolio continues to be resilient with high occupancy and strong tenant retention. However, higher borrowing costs and weaker regional currencies continue to impact our financial performance.

We remain very active on the rejuvenation front, with over S$900 million of acquisitions and S$150 million of divestments announced or completed year-to-date, and over S$370 million of ongoing AEIs. There will be more in the pipeline. Our commitment to greening our portfolio has also seen good progress. Management will remain vigilant and proactive in these uncertain times.”

Closing Thoughts

On the whole, I am satisfied with Mapletree Logistics Trust’s latest ‘report card’ – considering an improved top- and bottom-line in Q2 FY2023/24, very strong portfolio occupancy (where the occupancy rates in all the countries, except for China, are above 98.0%), along with a very healthy debt profile (where its aggregate leverage of 38.9% provides plenty of debt headroom before the regulatory level of 50.0% is reached; also, the REIT has 83% of borrowings hedged at fixed rates, which provides a good ‘protection’ against the high interest rate environment.)

Also, the 0.9% year-on-year (y-o-y) improvement in its distribution payout (as a result of divestment gains) was a surprise to me.

With that, I have come to the end of my review of Mapletree Logistics Trust’s latest Q2 and 1H FY2023/24 results review. Do note that everything you have just read is for educational purposes only, and they do not represent any buy or sell calls for the REIT. 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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