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Mapletree Logistic Trust’s Latest Earnings: Distribution Slips by 1.1%

Mapletree Logistics Trust  (SGX: M44U) released its fiscal second-quarter earnings report yesterday. The reporting period was from 1 July 2015 to 30 September 2015.

Mapletree Logistics Trust is a real estate investment trust (REIT) that owns 119 logistics properties around Asia. You can learn more about the REIT in here and here, or catch its previous quarter’s earnings here.

Financial highlights

You can see a quick rundown on the latest figures from Mapletree Logistics Trust below:

  1. Gross revenue rose to S$87.5 million in the reporting quarter, up 7.3% from the same quarter a year ago. Among the drivers behind the rise in revenue were contributions from acquisitions and higher revenue from existing assets.
  2. Subsequently, net property income (NPI) rose by 6% year-on-year. Mapletre Logistics Trust’s quarterly NPI came in at S$73 million, compared to the S$68.7 million recorded for the same period a year ago.
  3. Despite the top-line growth, the REIT’s distribution per unit (DPU) for the quarter was 1.86 cents, a 1.1% decline from the 1.88 cents seen in the same quarter in the previous fiscal year.
  4. The REIT’s investment properties were valued at nearly S$5 billion as of 30 September 2015. It has an adjusted net asset value per unit of $1.00, a 5.2% bump up from a year ago.

Beyond these, Foolish investors might also want to keep 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 summarised for Mapletree Logistics Trust below:

2015-10 MLT Debt Table

Source: Mapletree Logistics Trust’s earnings presentation

For the reporting quarter, Mapletree Logistics Trust took on an equivalent of S$293 million in Australian dollar loans to finance acquisitions and other capital expenditures. As a result, the REIT’s gearing increased to 38.8% as of 30 September 2015. The interest coverage also declined to 6.8 times while the average cost of borrowing stepped up to 2.3%.

There are positive developments on the balance sheet front though. For instance,  hedged and fixed rate borrowings had increased to 81%, up from 76% a year ago. This gives the REIT wider protection against any possible hike in interest rates in the short-term.

The real test in Mapletree Logistics Trust’s flexibility in finding sources of funding will come in the period between FY16/17 (fiscal year ending 31 March 2017) and FY18/19; roughly 60% of the REIT’s loans will progressively become due over that period. As always, Foolish investors should keep a watchful eye on the progress in the refinancing of debt.

Operational highlights

Mapletree Logistics Trust ended the reporting quarter with an overall portfolio occupancy of 96.9%, down slightly from the 97.2% seen a year ago. The REIT also had a weighted average lease term to expiry of about 4.8 years (by nett lettable area).

During the reporting quarter, Mapletree Logistics Trust completed the divestment of 134 Joo Seng Road for S$13.5 million and announced the divestment of 20 Tampines Street 92 for S$20 million. Meanwhile, the REIT also completed three acquisitions in Australia, South Korea, and Vietnam for a combined value of S$295 million during the first half of FY15/16.

Looking forward, Ng Kiat, the chief executive of the REIT’s manager, had given the following comments in the earnings release:

“We have maintained a stable DPU of 1.86 cents in 2Q FY15/16, comparable to the 1.85 cents achieved in 1Q FY15/16. We continue to focus on asset and lease management, actively engaging tenants for forward renewals in view of the upcoming SUA/MTB [single-user assets / multi-tenanted building] conversions in our portfolio as well as the economic slowdown.

To-date, we have renewed the bulk of the leases which are due for expiry this year, leaving a balance of about 5% of leases, by net lettable area, to be renewed in subsequent quarters.”

The remaining 5% of leases mentioned by Ng above is expected to exert pressure on Mapletree Logistics Trust’s occupancy and property expenses. Of the remaining leases, the REIT expects to convert some single-user assets (SUA) into multi-tenanted buildings (MTB).

Foolish summary

Mapletree Logistics Trust last traded at $1.03 on Monday. This translates to a historical price-to-book ratio of around 1.0 and a trailing distribution yield of around 7.2%.

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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.