Mapletree Industrial Trust’s Latest Earnings: Distribution Grows 4.4%, But Challenging Conditions Are Expected

Yesterday evening, Mapletree Industrial Trust  (SGX: ME8U) released first-quarter earnings report for its financial year ending 31 March 2017 (FY16/17). The reporting period was from 1 April 2016 to 30 June 2016.

As it name implies, Mapletree Industrial Trust is a real estate investment trust that focuses on the ownership of industrial properties. It currently has 85 properties in its portfolio that are valued at $3.6 billion, as of 31 March 2016. You can learn more about the REIT here or catch the results from its previous quarter here.

Financial highlights

The following’s a quick rundown on some of the latest financial figures from Mapletree Industrial Trust:

  • Gross revenue for the reporting quarter rose to S$84.1 million, up 3.0% from the same quarter a year ago.
  • Net property income (NPI) did better, increasing by 6.0% to $63.8 million.
  • Distribution per unit (DPU) for the reporting quarter was 2.85 cents, up 4.4% from the DPU of 2.7 cents for the first-quarter of FY15/16.
  • The REIT ended the reporting quarter with a net asset value per unit of $1.37, representing a 3.8% increase from $1.32 a year ago.

Beyond the above, investors may 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 Industrial Trust below:

Mapletree Industrial Trust debt profile
Source: Mapletree Industrial Trust’s earnings presentation

Mapletree Industrial Trust’s gearing is currently 28.2%, an improvement from the 30.0% seen a year ago. Although the weighted average all-in funding cost rose slightly to 2.5%, the interest coverage ratio had improved to 8.7.

Just 3.5% of the REIT’s loans have to be refinanced during the current fiscal year. But still, investors may want to keep a watchful eye on the REIT’s progress in the refinancing of debt.

Operational highlights

Mapletree Industrial Trust ended the quarter with an overall 93.5% portfolio occupancy, slightly lower than the 94.6% recorded in the prior sequential quarter and the 93.5% logged in the same quarter a year ago.

The REIT also reported a weighted average lease term to expiry (by gross rental income) of 2.8 years. Approximately 14% of its total leases are up for renewal in FY16/17.

Mapletree Industrial Trust ended the quarter with an average rental rate of $1.92 per square feet per month. This is the 11th consecutive quarter-on-quarter increase in the gross rental rate seen.

Tham Kuo Wei, the chief executive of the REIT’s manager, summarized the quarter with a few words:

“MIT [Mapletree Industrial Trust] delivered a healthy set of financial results despite facing headwinds in the Singapore industrial market. We continue to intensify our leasing efforts to retain our tenants. As at 30 June 2016, only 14.1% of leases (by gross rental income) are due for renewal in FY16/17, a decrease from 21.1% in the preceding quarter.

The development of the build-to-suit (“BTS”) facility for Hewlett Packard Singapore is progressing well with the revenue contribution expected to commence in the second half of FY16/17.”

A future outlook

Despite the REIT’s growth in the reporting quarter, its manager expects business conditions to remain challenging:

“The business environment is expected to remain subdued in view of the global uncertainties and large impending supply of industrial space in Singapore. This is likely to exert pressure on occupancy and rental rates. For leases expiring in FY16/17, the Manager remains focused on tenant retention to keep the portfolio’s occupancy healthy.”

Mapletree Industrial Trust’s units last traded at a price of $1.75 on Tuesday. This translates to a historical price-to-book ratio of 1.28 and a trailing distribution yield of 6.4%.

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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 doesn’t own shares in any companies mentioned.