Mapletree Logistic Trust’s Latest Earnings: Headwinds Ahead

Mapletree Logistics Trust  (SGX: M44U) released its fiscal third-quarter earnings report for its fiscal year ending 31 March 2016 (FY15/16) yesterday evening. The reporting period was from 1 October 2015 to 31 December 2015 .

Mapletree Logistics Trust is a real estate investment trust (REIT) that owns 118 logistics properties around Asia (as of 31 December 2015). You can learn more about the REIT in here and here, or catch the results from its previous quarter here.

Financial highlights

The following’s a quick summary of the financial figures for the reporting quarter:

  1. Gross revenue for the quarter rose to S$88.9 million, up 7.3% from the same quarter a year ago.
  2. Subsequently, net property income (NPI) for the quarter rose by 6.7% year-on-year to S$74.1 million.
  3. The higher revenue did not produce much benefit for unitholders. The REIT’s distribution per unit (DPU) for the reporting quarter was 1.87 cents, unchanged from a year ago. Investors should note that the quarter’s DPU includes divestment gains from the sale of the properties, 134 Joo Seng Road and 20 Tampines Street 92. The gains are expected to be distributed over four quarters, starting from the reporting quarter. Excluding the divestment gains, the REIT’s DPU for the quarter would have fallen by 2.2% year-on-year.
  4. The REIT’s investment properties are valued at S$5 billion as of 31 December 2015. It had an adjusted net asset value per unit of S$1.02 for the reporting quarter, up from S$0.96 a year ago.

Beyond these, Foolish investors might also want to keep an eye on 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. These are summarised for Mapletree Logistics Trust below.

2016-01-25 MLT Debt Table
Source: Mapletree Logistics Trust’s Earnings Presentation

You can see that the REIT’s total debt had climbed compared to a year ago and that is partly due to additional loans taken for capital expenditures and acquisitions made in Australia and Vietnam during FY15/16. The REIT’s gearing increased as a result to 39% as of 31 December 2015. Meanwhile, the interest cover ratio also declined to 6.2 times while interest rates rose to 2.4%. All these may be worth watching going forward.

There was a positive development in the REIT’s balance sheet and that is its hedged and fixed rate borrowings had increased to 80%, up from 76% a year ago. This might give Mapletree Logistics Trust some protection in the near term against interest rate hikes.

For the reporting quarter, two loans worth S$150 million were taken up as a part of efforts to refinance existing loans. The outstanding loans for FY15/16 is minimal as well. As always, Foolish investors should keep a watchful eye on a REIT’s progress in the refinancing of debt.

Operational highlights

Mapletree Logistics Trust ended the reporting quarter with an overall 96.9% portfolio occupancy, unchanged from the quarter before. The REIT also had a weighted average lease term to expiry of about 4.7 years (by nett lettable area).

Ng Kiat, Chief Executive Officer of the REIT’s Manager, had given the following statement on the REIT’s performance for the quarter in the earnings release:

“Through active lease and asset management, we have renewed or replaced most of the leases expiring this year, thereby maintaining a high portfolio occupancy of 96.9%. The recent divestments of two properties in Singapore have realised a total net divestment gain of S$10 million which we will be distributing to Unitholders over four to eight quarters, starting from 3Q FY15/16. We will continue with our active asset management strategy to maintain stable occupancy and to achieve organic growth from our portfolio.”

The REIT’s management also voiced caution on the outlook ahead. Macroeconomic uncertainties in China has delayed leasing decisions and take-up of new space.

Foolish summary

Mapletree Logistics Trust last traded at $0.91 on Monday. This translates to a historical price-to-book ratio of around 0.9 and a trailing distribution yield of 8.2%.

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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 units in Mapletree Logistics Trust.