10 Quick Things to Learn from Mapletree Logistics Trust’s Annual General Meeting

Credit: Axisadman

From time to time, Foolish hats turn up at annual general meetings (AGMs).

My better half is a shareholder of Mapletree Logistics Trust (SGX: M44U). As a brief introduction, Mapletree Logistics Trust is a real estate investment trust (REIT) which owns 118 logistics-based properties in Singapore, Hong Kong, Japan, China, Malaysia, South Korea, Australia, and Vietnam.

The REIT’s AGM was held just yesterday and I attended as a proxy for my better half.

Without further ado, here are 10 quick things I learnt from the meetiing:

  1. Chairman Paul Ma Kah Woh kicked off the AGM. He said that he would be stepping down from his Chairman role soon. Ma will be replaced by Lee Chong Kwee, effective from 1 August 2016.
  2. Highlights from the financial year ended 31 March 2016 (FY15/16) were next. Ms Ng Kiat, the chief executive of the REIT’s manager, highlighted Mapletree Logistics Trust’s disciplined capital management. She said that 81% of the REIT’s debt was hedged with fixed interest rates. Furthermore, 70% of its income stream was hedged into the Singapore dollar. The latter could be important as Mapletree Logistics Trust operates in seven countries.
  3. Mapletree Logistics Trust is celebrating its 10th year as a listed REIT. Ng noted that the REIT started in 2005 with an asset value of $462 million and just 18 properties. The asset value has since increased to $5.1 billion in FY15/16. And as mentioned, the REIT now has 118 properties. Since its initial public offering in 2005, Mapletree Logistics Trust’s total return is 152%. The majority of the return (103%) comes from the REIT’s distributions. The rest is from capital appreciation.
  4. The phrase “well-staggered” was used a number of times. Ng noted that Mapletree Logistics Trust has a well-staggered debt maturity profile with a weighted average debt duration of 3.5 years. On the lease end, the REIT also has a well-staggered lease expiry profile with a weighted average lease expiry (WALE) of 4.5 years.
  5. Wong Mei Lian, the REIT manager’s chief financial officer, also shared some financial highlights. She noted that the three FY15/16 acquisitions have accretive yields and built-in annual rental escalations. Notably, the Cole Chilled Distribution Centre in Australia represented the REIT’s maiden entry into Australia. The Australian centre has a WALE of 19 years. The next five proposed acquisitions will be yield-accretive and have built-in annual rental escalations as well.
  6. Wong also said that Mapletree Logistics Trust’s gearing will decline from 39.6% to about 35% after the issuance of $250 million in perpetual securities. This gives debt headroom for the REIT, she noted. Elsewhere, the weighted average borrowing cost is 2.3% while the interest coverage is 5.9 times.
  7. Wong also said that the REIT’s growth had come with higher quality assets. For FY15/16, three territories, namely Singapore, Hong Kong, and Japan, accounted for over 75% of the REIT’s total property value. Wong also mentioned that the REIT has a diverse tenant base with no one customer making up more than 5% of revenue. (Mapletree Logistics Trust has 519 tenants.)
  8. Wong added that more than three quarters of the REIT’s portfolio is serving consumer-related sectors. These sectors may benefit from rising domestic consumption from Asia’s growing middle class. Additionally, Wong said that 18 assets – or 12.7% of the portfolio – have land leases that expire in 30 years or less. As a whole, the REIT’s weighted average lease term to expiry of the underlying leasehold land is 42 years.
  9. Mapletree Logistics Trust’s distribution per unit declined by 1.6% in FY15/16. The first question from the audience was on the lower DPU. The unitholder noted that economic conditions were tough but Ascendas Real Estate Investment Trust (SGX: A17U) and Mapletree Industrial Trust (SGX: ME8U) both recorded small DPU increases. Ng said that the issues for Mapletree Logistics Trust were transitional. She felt that the REIT had several single-user asset (SUA) leases come due at an unfortunate time in the economic cycle. Mapletree Logistics Trust has been working to convert a few properties into multi-tenanted buildings (MTB) but the change and ramp up requires some time. She also mentioned that Ascendas encountered the same issues a couple of years ago. Ma said that the geographical diversity of Mapletree Logistics Trust helped cushion some of the negative impact.
  10. A question about the negative interest rate environment in Japan also came up. Wong noted that the REIT’s Japan-based debt have floating interest rates. Ng also believes that the negative interest rate environment will not have an impact on the REIT’s business.

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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.