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Mapletree Logistics Trust’s Latest Earnings: Slight But Steady Growth Seen

Mapletree Logistics Trust (SGX: M44U) released its earnings for FY14/15 (fiscal year ended 31 March 2015) yesterday evening.

The real estate investment trust owns some 117 logistics properties which are collectively valued at S$4.63 billion as of end-FY14/15. These properties are scattered across a few Asian nations, namely Singapore, Japan, Hong Kong, South Korea, China, Malaysia, and Vietnam.

With these as a backdrop, let’s dig into the REIT’s latest set of numbers.

Financial highlights

For the whole of FY14/15, Mapletree Logistics Trust’s total revenue was up 6% from S$310.71 million a year ago to S$330.11 million. The increase was driven partly by broad-based growth from existing assets, maiden contributions from six properties acquired during the year, as well as a full year’s worth of contribution from Mapletree Benoi Logistics Hub.

Meanwhile, the REIT’s property expenses had soared by 22% to S$52.67 million due to the enlarged portfolio and conversions of single-tenanted buildings into multi-tenanted ones. The much faster growth in property expenses in relation to revenue had led to only a 4% uptick in net property income to S$277.45 million when compared to a year ago.

Mapletree Logistics Trust ended FY14/15 with a distributable amount to unitholders of S$184.9 million, up 2.9% from a year ago. As a result of an enlarged unit base because of the REIT’s distribution reinvestment plan, distributions per unit (DPU) for FY14/15 had grown by just 2.0% to 7.50 cents per share.

Given that a REIT’s net asset value (total assets sans all liabilities) per unit can be a useful proxy for its underlying economic value, unitholders of Mapletree Logistics Trust might be happy to know that the REIT’s adjusted-NAV per unit has grown by 6.3% from S$0.95 a year ago to S$1.01.

But while changes in Mapletree Logistic Trust’s distributions and NAV per unit are important to note, unitholders may also want to keep an eye on the REIT’s financial strength. The table below shows a summary of the important metrics to watch and how they compare with a year ago:

Mapletree Logistics Trust's balance sheet figures

Source: Mapletree Logistics Trust’s earnings report

As you can see, most of the metrics that are related to the REIT’s financial strength have weakened. The amount of borrowings have increased; the leverage ratio has stepped up a little; the interest expenses have gone up; and the interest cover has gone down. These are all areas to keep an eye on in the future.

Mapletree Logistics Trust has 60% of its total debt load coming due between FY16/17 and FY18/19. Investors might also want to keep a close watch on the progress of the REIT’s refinancing of its borrowings; if interest expenses do climb in the process of refinancing, the REIT’s bottom-line can easily get dinged.

Operational highlights and future plans

The REIT ended FY14/15 with a “stable portfolio occupancy of 96.7%.” While that’s a healthy figure, it’s also a drop-off from the occupancy rate of 98.3% seen a year ago. According to the REIT, “the decline was attributable to lower occupancy in Singapore due to downtime caused by the conversion of single-user assets to multi-tenanted buildings, partially offset by higher occupancies in other countries.”

Unitholders of Mapletree Logistics Trust might want to see the occupancy rate step back up again over time.

Elsewhere, Mapletree Logistics Trust reported positive rental reversions of 8% in FY14/15, which can be taken to be a sign that the REIT’s properties still have healthy demand.

Ng Kiat, Chief Executive Officer of the REIT’s Manager, had given some insights about the REIT’s future plans in the earnings release:

“FY14/15 was a busy year as we expanded our presence in the target growth markets with six yield-accretive acquisitions. For FY15/16, we will continue with intensive marketing and leasing efforts as we expect more conversions of SUAs [single-user assets] to MTBs [multi-tenanted buildings] in Singapore”

”We will also continue with our capital recycling strategy to divest older, lower yielding assets and recycle the proceeds into higher yielding investments. In this regard, we are divesting 134 Joo Seng Road, completion of which is pending regulatory approval, and we will be embarking on a redevelopment project at 76 Pioneer Road this financial year.”

Foolish Takeaway

But despite the actions described above that Mapletree Logistics Trust is engaging in to fuel future growth, the REIT did warn of an economic slowdown in Asia which may lead to “subdued” rental growth for logistics space in the region. In addition, the REIT also warned that its “portfolio occupancy and revenue will likely continue to be under pressure” during the transition phase of converting more SUAs into MTBs.

These are all things for investors to watch.

Based on Mapletree Logistics Trust’s closing price of S$1.255 yesterday, the REIT has a trailing dividend yield of 6% and a price-to-book ratio of 1.24.

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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 James Yeo doesn’t own shares in any companies mentioned.