This REIT Has Just Increased Its Distributions per Unit By 11.5%

Mapletree Commercial Trust  (SGX: N2IU) released its fiscal third quarter earnings report yesterday. The reporting period was from 1 October 2014 to 31 December 2014.

Mapletree Commercial Trust is a Singapore-focused real estate investment trust (REIT) which – as its name suggests – owns mainly commercial properties.

At the local front, the REIT has ownership of Singapore’s largest mall, VivoCity, as well as the PSA Building, Bank of America Merrill Lynch HarbourFront (MLHF) and Mapletree Anson. You can learn more about the REIT in here and here.

Financial highlights

Here’s a rundown on the financial figures found in the REIT’s latest earnings report:

  1. Gross revenue rose to $72.8 million in the fiscal third quarter, up 6.5% from the same period a year ago. The main driver behind the rise in revenue was the 7.8% increase in gross revenue from VivoCity.
  2. Net property income (NPI) for the quarter rose by a healthy 10.7% year-on-year. NPI came in at $54.7 million, compared to $49.4 million for the same quarter a year ago. The rise in NPI was also due to VivoCity’s contributions as well.
  3. Distribution per unit (DPU) for the quarter will be 2.08 cents, a healthy 11.5% increase from 1.865 cents in the third quarter last year.
  4. Including this quarter, the REIT will have distributed 6 cents per unit for the first nine months of the financial year which began on 1 April 2014 (FY 2014/2015); this represents a 10.7% increase in DPU over the corresponding period for FY 2013/2014.
  5. The REIT’s total portfolio value stands at $4.1 billion, with a net asset value per unit of $1.17.

Foolish investors might want to keep up an eye on a REIT’s debt profile. The debt profile may provide clues on how a REIT is funded, and its sensitivity to the interest rate environment. These are summarized below for Mapletree Commercial Trust.

Gearing Ratio 37.9%
Interest Cover Ratio 5.5 times
Weighted Average Debt Maturity 3.0 years
Fixed Debt 73.8%
Weighted Average All-In Interest Cost 2.18%
Unencumbered Assets as % of Total Assets 100%
Total Borrowings $1.55 billion

Source: REIT earnings presentation

For the fiscal third quarter, Mapletree Commercial Trust managed to refinance $250m in loans that were going to be due in FY 2015/2016.

The real test in the flexibility of Mapletree Commercial Trust’s funding will come in FY 2016/2017 and FY2017/2018, when about 38% of its loans progressively become due. The progress in the refinancing of debt is where Foolish investors should keep a watchful eye on.

Operational highlights

Mapletree Commercial Trust ended the quarter with an overall portfolio occupancy of 99.5%. The REIT also has a weighted average lease term to expiry of about 2 years. Shopper traffic at VivoCity increased by 0.7% for the first nine months of the financial year, which is a good sign.

Looking forward, Ms Amy Ng, Chief Executive Officer of the manager of Mapletree Commercial Trust, had this to add:

“Besides the delivery of 11.5% year-on-year DPU growth for 3Q FY14/15 at 2.08 cents, I am also pleased to report that we have successfully tapped the debt capital market during the quarter, raising S$50 million through the issuance of 5-year fixed rate notes at 2.65% p.a. The proceeds had been used to early refinance part of the debt coming due in April 2015. We have also put in place a bilateral term loan facility of S$200 million in January 2015, and will be utilising this together with an existing committed revolving credit facility to refinance the remaining debt due in April 2015.”

Moody’s upgrade of MCT’s credit rating from Baa2 to Baa1 also affirms MCT’s proactive approach to capital management and strong operating performance track record across its property portfolio since listing in April 2011.”

Foolish summary

Mapletree Commercial Trust last traded at S$1.48 per unit on Wednesday. This translates to a historical price-to-book ratio of 1.28 and a distribution yield of around 5.3%.

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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 doesn’t own shares in any companies mentioned.