Can the Dividend Growth at Mapletree Logistics Trust Continue? Part 2

Welcome to the second part of the article on Mapletree Logistics Trust (SGX: M44U). In my previous article, I covered the sources of revenue, and sales growth for Mapletree over the past five financial years. In my next step, I’d like look at the net property income and debt profile of the logistic warehouse owner.

As a recap: Mapletree Logistics is a real estate investment trust (REIT) that owns 117 logistics properties around Asia with 408 diverse set of tenants. The REIT’s share price recorded returns of about 254% in the past five years.

A closer look

Mapletree MLT - 1

Source: REIT Earnings Report; 2009 and 2010 follows calendar year; FY 2011/2012 covers 15 months

In the financial year ended 31 March 2014 (FY13/14), the net income property (NPI) for Mapletree Logistics came in at $267.7 million. That’s a 48% increase from the NPI for the financial year ended 31 December 2009. This is also lower than the 50% in gross revenue over the same period. On the side of NPI growth, it mirrors the growth sources in gross revenue – Singapore, Japan and South Korea. The continued growth in NPI this end is important for Mapletree to sustain and grow it distribution per unit in the future. 

Foolish investors might want to keep up an eye with the REIT’s debt profile. The debt profile may provide clues on how the REIT is funded, and its sensitivity to the interest rate environment. This is summarized below.

Aggregate Leverage Ratio 34.70%
Interest Cover Ratio 7.9 times
Weighted Average Debt Maturity 3.1 years
Hedged / Fixed Rate borrowings 76%
Weighted Average Annualised Interest Rate 2.10%
Total Borrowings $1.6 billion

  Source: REIT earnings presentation

As mentioned in my prior earnings coverage, the real test in flexibility of funding will come in the financial year 2016/2017 to financial year 2018/2019, when about 59% of its loans progressively become due. The progress in refinancing of debt is where Foolish investors should keep a watchful eye.

Foolish summary

As lifelong students of Foolish long term investing, it pays to look under the hood to understand whether a rise in the REIT’s share price is supported by the quality of growth that we are looking for. 

Share prices of Mapletree Logistics has benefited from a combination of lower share price valuations in 2009, and growth in gross revenue and NPI over the past five plus financial years. The nature of business may be cyclical, therefore cautious Foolish investors may want to seek a higher margin of safety in order to generate an adequate return.

Mapletree Logistics Trust last traded at S$1.24 yesterday. This translates to a historical price-to-book ratio of 1.27 and a distribution yield of around 6.1%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong owns shares in Mapletree Logistics Trust.