Latest Earnings From Mapletree Industrial Trust: Growth Reported, But Possible Headwinds Ahead

Yesterday evening, Mapletree Industrial Trust (SGX: ME8U) released its fourth-quarter and full year earnings for FY15/16 (fiscal year ended 31 March 2016).

Mapletree Industrial Trust, as its name suggests, is a real estate investment trust (REIT) which invests mainly in industrial real estate. Currently, it has 85 properties in its portfolio that’s spread across five property types, namely Flatted Factories, Hi-Tech Buildings, Business Parks, Stack –up/Ramp up Buildings, and Light Industrial Buildings. These properties are collectively valued at around S$3.5 billion (as of 31 March 2016).

With that, let’s take a look at Mapletree Industrial Trust’s latest results.

Financial highlights

The following’s a quick summary of some of the important financial figures for the reporting period:

  1. Gross revenue for the reporting quarter rose to S$84.0 million, up 5.8% from the same quarter a year ago. For the whole of FY15/16, revenue was up 5.6%, clocking in at S$331.6 million. Growth here came mainly from higher rental and occupancy rates across most property segments.
  2. Net property income (NPI) followed suit, rising by 7.4% in the reporting quarter to S$62.0 million and by 7.2% to S$245.1 million for FY15/16.
  3. The increase in revenue and NPI flowed through to the bottom-line with the REIT’s amount available for distribution increasing by 7.8% from S$46.7 million in the fourth-quarter of FY14/15 to S$50.4 million in the reporting quarter. For the year, the amount available for distribution had increased by 9.4% from S$180.8 million to S$197.8 million.
  4. Consequently, the REIT’s distribution per unit (DPU) rose 6.0% in the quarter to 2.81 Singapore cents and 6.9% in FY15/16 to 11.15 Singapore cents.
  5. Mapletree Industrial Trust ended FY15/16 with a net asset value per unit of S$1.37, a 3.8% increase from the S$1.32 seen a year ago.

Let’s now move on to look at the REIT’s debt profile:

Mapletree Industrial Trust
Source: Mapletree Industrial Trust’s earnings presentations

You can see in the table above that the REIT’s total debt had reduced compared to a year ago. This resulted in a reduction in the aggregate leverage ratio from 28.2% to 30.6%.

Another positive development in the REIT’s balance sheet is the increase in its hedged/fixed rate borrowings which should provide some protection for the REIT should interest rates increase in the short-term.

But, the increase in funding costs is something investors should keep an eye on as it may eat into the REIT’s bottom-line if it becomes a prolonged trend.

Operational highlights

Mapletree Industrial Trust ended the reporting quarter with an overall portfolio occupancy rate of 94.6%, largely unchanged from the 94.7% seen in the previous sequential quarter. But, this is up by 4.4 percentage points from the 90.2% seen in the fourth-quarter of FY14/15.

The REIT also had a weighted average lease term to expiry of about 2.8 years (by gross rental income). Approximately 21% of total leases are up for renewal in FY16/17.

Mapletree Industrial Trust ended the quarter with a gross rental rate of S$1.90 per square feet per month. This is the 10th consecutive quarter-on-quarter increase in the gross rental rate seen. The last time there was a sequential decline in the gross rental rate was in the second-quarter of FY13/14.

Tham Kuo Wei, the chief executive of Mapletree Industrial Trust’s manager, had given the following statement in the earnings release on the REIT’s performance for the year:

“Despite the challenging market conditions, MIT continued to deliver healthy returns in FY15/16. This was largely driven by the contribution from the completed BTS data centre at 26A Ayer Rajah Crescent and resilient portfolio performance. The ongoing redevelopment at the Telok Blangah Cluster and commencement of the asset enhancement initiative (“AEI”) at Kallang Basin 4 Cluster underscore our commitment in growing the Hi-Tech Buildings segment, which will enhance MIT’s growth profile in the longer term.”

The REIT’s outlook

But, Mapletree Industrial Trust also voiced caution on the outlook ahead. The management team commented that the business environment “is expected to remain challenging, given the muted global economic outlook and large supply of industrial space in Singapore.” Moreover, “the ongoing economic restructuring in Singapore is expected to result in the cost increase of outsourced service contracts. These may exert pressure on rental and occupancy rates, while property expenses are expected to increase.”

Mapletree Industrial Trust last traded at $1.64 on Monday. This translates to a price-to-book ratio of 1.2 and a distribution yield of 6.8%.

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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 Esjay does not own shares in any companies mentioned.