Mapletree Industrial Trust’s Latest Earnings: A Winning Streak of Growing Annual Distributions Continues

Mapletree Industrial Trust (SGX: ME8U) released its full-year earnings for the financial year ended 31 March 2015 (FY 14/15) yesterday evening and with that, came the continuation of an impressive winning streak for the trust (more on this to come shortly).

For a quick backdrop before we dig into the numbers, Mapletree Industrial Trust is a real estate investment trust which has 84 industrial properties scattered all over Singapore; as of 31 March 2015, these properties cover a total gross floor area of around 19.7 million square feet and are collectively valued at S$3.4 billion.

Financial highlights

Mapletree Industrial Trust clocked a 4.9% increase in gross revenue to S$313.9 million for the whole of FY 14/15. With a milder increase in property expenses, the REIT’s net property income for the same period was able to grow 6.5% to S$228.6 million.

The top-line growth managed to trickle down to the bottom-line as Mapletree Industrial Trust’s distributable income climbed 8.9% from a year ago to S$180.8 million. Despite a slight 3.3% uptick in the number of units in issue, the trust’s annual distributions per unit (DPU) still managed to step up by 5.1% to 10.43 Singapore cents.

Speaking of the growth in DPU, this brings me to Mapletree Industrial Trust’s winning streak. It’s rare to find a REIT in Singapore that has been able to continuously increase its annual DPU – Mapletree Industrial Trust happens to be one such REIT.

Annual distributions from Mapletree Industrial Trust has grown in each financial year since it was listed in October 2010. You can see the REIT’s impressive track record in the table below:

Mapletree Industrial Trust's distributions

Source: Mapletree Industrial Trust’s website

Moving onto the REIT’s financial strength, some important figures are highlighted below:

Mapletree Industrial Trust's balance sheet figures (31 March 2015)

Source: Mapletree Industrial Trust’s earnings releases

Mapletree Industrial Trust ended FY 14/15 with a balance sheet that is stronger in some aspects but weaker in others when compared to a year ago. For instance, the REIT had reduced both its borrowings as well as leverage ratio, and had also managed to lengthen the tenor of its borrowings; those are the good things.

But, for the bad, the REIT had seen an increase in its average interest rate and also a slight drop in its interest coverage ratio. In particular, the former might be something investors would want to keep an eye on as higher interest expenses can possibly result in a thinner bottom-line for the REIT.

Meanwhile, Mapletree Industrial Trust’s net asset value per unit had grown by 10% to S$1.32 (as at 31 March 2015) from S$1.20 a year ago.

Operational highlights and future outlook

In the fourth quarter of FY 14/15, Mapletree Industrial Trust had an average portfolio occupancy rate of 90.2%, which is down slightly from the selfsame figure of 91.3% in the same period a year ago.

The decrease in occupancy rates might not be welcome, but the REIT did manage to enjoy a nice increase in rental rates for its properties. In the fourth quarter of FY 14/15, Mapletree Industrial Trust’s portfolio had an average rental rate of S$1.84 per square feet month; this is 5.1% higher than the average rental rate of S$1.75 seen a year ago.

Investors might also want to note that Mapletree Industrial Trust has managed to maintain the diversity of its tenant base during the year. The REIT ended FY 14/15 with “over 2,000 tenants”, a situation that’s unchanged from FY 13/14. In addition, the REIT’s top 10 tenants only made up 17.2% of total gross rental income in the reporting period and that’s just a slight increase from the selfsame figure of 16.1% seen a year ago.

Allthough FY 14/15 saw Mapletree Industrial Trust bring in steady growth in distributions, the REIT did send out some caution in its outlook for the year ahead (FY 15/16). It commented in the FY 14/15 earnings release:

“The median rental rate for multi-user factory space island-wide in 1Q2015 declined to S$1.95 psf/mth from S$1.98 psf/mth in the preceding quarter. The median rental rate for business park space island-wide decreased to S$4.00 psf/mth from S$4.09 psf/mth in the previous quarter.

The outlook of the industrial property market is expected to remain mixed for the rest of 2015. Overall rents for multi-user industrial developments are expected to ease further due to supply pressures while rents for business parks and higher specification buildings are expected to strengthen on the back of a tightening in supply.”

Foolish Summary

Mapletree Industrial Trust closed yesterday at S$1.61 per unit. At that price, the REIT has a price to book ratio of 1.2 (based on its latest NAV) and a distribution yield of 6.5% (based on the DPU of 10.43 cents for FY 14/15).

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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 Stanley Lim doesn’t own shares in any companies mentioned.