Mapletree Logistic Trust’s Latest Earnings: Distribution Holds Steady but Challenging Conditions Remain

Credit: Axisadman

Yesterday evening, Mapletree Logistics Trust  (SGX: M44U) released its first-quarter earnings for its financial year ending 31 March 2017 (FY16/17). The reporting period was from 1 April 2016 to 30 June 2016.

Mapletree Logistics Trust is a real estate investment trust (REIT) that owns 118 logistics properties around Asia. 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 rundown on some of the latest financial figures for Mapleree Logistics Trust:

  1. Gross revenue rose to S$89.6 million in the first-quarter, up 5.3% from the same quarter a year ago.
  2. Net property income (NPI) climbed by 5.7% year-on-year to $75.2 million.
  3. The reporting quarter’s distribution per unit (DPU)  was 1.85 cents, unchanged 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 and eight quarters, respectively, and started from the third-quarter of FY15/16.
  4. Mapletree Logistics Trust’s investment properties are valued at S$5.09 billion as of 30 June 2016. The REIT ended the reporting quarter with an adjusted net asset value per unit of $0.98; that’s a slight decline from the $0.99 seen 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 summarized for Mapletree Logistics Trust below:

2016-07-25 MLT Debt Table
Source: Mapletree Logistics Trust’s Earnings Presentation

The REIT’s aggregate leverage ratio was 39.6% on 31 March 2016. It issued $250 million in fixed rate perpetual securities (with an interest rate of 4.18%) and used part of the proceeds to repay some debt. This lowered the aggregate leverage to 35.7% in the reporting quarter. That said, the ratio is still higher than at end-June 2015.

Meanwhile, borrowing costs rose from 2.2% to 2.3% over the last 12 months. The interest rate coverage ratio also declined to 5.6 times.

Around 5% of Mapletree Logistics Trust’s loans have to be refinanced during this fiscal year. Investors may want to keep a watchful eye on the progress in the REIT’s refinancing of debt.

Operational highlights

Mapletree Logistics Trust ended the quarter with an overall 95.4% portfolio occupancy, slightly lower than the 96.2% recorded in the prior sequential quarter. The REIT also reported a weighted average lease term to expiry of about 4.4 years (by nett lettable area).

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

“Amidst the challenging operating environment, we remain focused on managing lease expiries and tenant retention, and renewed or replaced 98% of leases expiring in 1Q [first quarter].

During the quarter, we also announced two accretive acquisitions for approximately S$138 million – a portfolio of four warehouses in Australia and a logistics facility in Malaysia. These acquisitions, when completed, will further strengthen MLT’s [Mapletree Logistics Trust] presence in the prime logistics hubs of Sydney and Shah Alam respectively.

In addition, we successfully raised S$250 million from the issuance of perpetual securities in May. This issuance has provided an alternative source of funding for MLT and enhanced its financial flexibility to pursue investment opportunities.”

On the future

With regard to the future of Mapletree Logistics Trust, the REIT’s manager expects conditions to remain challenging:

“The global economic conditions remain fragile and uncertain, especially following the Brexit referendum. The leasing environment for MLT’s portfolio is challenging and pressure on occupancy and rental rates will likely remain given the uncertain economic outlook. Nevertheless, MLT’s diversified portfolio, large tenant base and well-staggered lease expiry profile are expected to provide resilience to the portfolio.

Amidst the difficult operating environment, the Manager will continue to focus on proactive asset and lease management to ensure stable portfolio returns. In addition, the Manager will evaluate and pursue new opportunities to create value for Unitholders while maintaining a disciplined capital management approach.”

Mapletree Logistics Trust last traded at $1.06 on Monday. This translates to a historical price-to-book ratio of 1.08 and trailing distribution yield of 7%.

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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.