Mapletree Logistic Trust’s Latest Earnings: Headwinds Expected to Continue

Mapletree Logistics Trust (SGX: M44U) released its fourth-quarter earnings report yesterday. The reporting period was from 1 January 2016 to 31 March 2016.

Mapletree Logistics Trust is a real estate investment trust (REIT) that owns 118 logistics properties around Asia. You can learn more about the company here and here , or catch the previous quarter earnings here .

Financial Highlights

Here’s a rundown on the financial figures for the financial year ending 31 March 2016 (FY15/16):

  1. Gross revenue rose to S$88.4 million in the fourth-quarter, up 4.4% from the same quarter a year ago. For FY15/16, gross revenue rose 6% year on year to end at S$350 million.  
  2. Net property income (NPI) rose by 3.3% year on year. For the fourth quarter, NPI came in at S$72.6 million. For the full fiscal year, NPI was S$290.8 million.
  3. Distribution per unit (DPU) for the reporting quarter was 1.80 cents, down 2.7% from a year ago. Investors should note that the reporting quarter’s DPU includes divestment gains from the sale of 134 Joo Seng Road and 20 Tampines Street 92. The gains are expected to be distributed over four quarters, starting from the previous quarter. For FY15/16, DPU was 7.38 cents.  
  4. The REIT’s investment properties are valued at S$5.1 billion as of 31 March 2016. It had an net asset value per unit of $1.02.

Beyond that, Foolish investors might also want to keep up an eye with 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. This is summarized below.

2016-04-30 Mapletree Logistics Debt Table

Source: Mapletree Logistics Trust’s Earnings Presentation

The REIT’s gearing increased to 39.6% as of 31 March 2016. This was due to additional loans taken to finance acquisitions and capital expenditure. The gearing level is also on the higher end of scale. The Monetary Authority of Singapore (MAS) had revised the upper leverage limit for REITs to 45% last year. 

At the same time, interest rate coverage also declined to 5.9 times while its weighted average annualised interest rates rose to 2.3%.  

For the quarter, a S$85 million term loan was extended for eight years. There are still around S$200 million worth of loans to be refinanced during the coming fiscal year. Foolish investors should keep a watchful eye on the progress in refinancing of debt.

Operational Highlights

Mapletree Logistics ended the quarter with an overall 96.2% portfolio occupancy, slightly lower than the prior quarter. The REIT also had an weighted average lease term to expiry of about 4.5 years (by nett lettable area).  

Looking forward, Ms Ng Kiat, Chief Executive Officer of the Manager, summarized the year in a few words:

“FY15/16 was a challenging year. We faced significant headwinds in Singapore due to the conversions of SUAs [single-user assets] to MTBs [multi-tenanted buildings] amidst rising supply of warehouse space. The global economic slowdown also contributed to a difficult leasing environment. Nonetheless, through active asset and lease management, we have maintained a healthy portfolio occupancy rate of 96.2% and a well-staggered lease expiry profile with a WALE [weighted average lease expiry] of 4.5 years.”

The management expects conditions to remain challenging:

“The year ahead is expected to remain challenging given the uncertain macroeconomic outlook. The softening economic environment will likely exert pressure on rental rates although demand for modern, well-located warehouse space is expected to remain stable. Tenants are cautious and slower to commit. Nevertheless, MLT’s diversified portfolio, coupled with a well-staggered lease expiry profile, is expected to continue to provide resilience to the portfolio’s income and cash flows.”

Foolish summary

Mapletree Logistics Trust last traded at $1.08 on Friday. This translates to a historical price-to-book ratio of under 1.1 and a distribution yield of around 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 Chin Hui Leong owns units in Mapletree Logistics Trust.