Mapletree Industrial Trust’s Latest Earnings: Distribution Grows 1.8% as Rental Rates Stall

This morning, Mapletree Industrial Trust  (SGX: ME8U) released its second-quarter earnings report for its financial year ending 31 March 2017 (FY16/17). The reporting period was from 1 July 2016 to 30 September 2016.

As a quick background, the REIT focuses on the industrial property sector and currently has 85 properties in its portfolio ( (all located in Singapore) that are valued at $3.6 billion, as of 31 March 2016. You can see the results from the REIT’s previous quarter here.

Financial highlights

The following’s a quick rundown on some of the REIT’s latest financial figures:

  1. Gross revenue came in at S$84.2 million in the second-quarter, up 1.8% from the same quarter a year ago.
  2. Net property income (NPI) rose 4.3% year-on-year to S$63.6 million.
  3. Distribution per unit (DPU) for the reporting quarter was 2.83 cents, up 1.4% from the DPU of 2.79 cents seen a year ago.
  4. The REIT ended the reporting quarter with a net asset value per unit of $1.37, up 3%.

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 Industrial Trust below:

Source: Mapletree Industrial Trust’s earnings Presentations

Mapletree Industrial Trust’s aggregate leverage ratio was 29% as of 30 September2016, a slight improvement from a year ago. But, its weighted average all-in funding cost had ticked up to 2.6% while the interest rate coverage had dipped slightly to 8.0 times.  Mapletree Industrial Trust also said that 68.6% of its debt are on fixed interest rates, down from the selfsame figure of 80% from a year ago.

The REIT has only 2.8% of its total loans coming due in the current fiscal year, but a collective 34.8% of its overall borrowings are due for refinancing over the next two fiscal years. Foolish investors should keep a watchful eye on the REIT’s progress in refinancing its debt.

Operational highlights and a future outlook

Mapletree Industrial Trust ended the reporting quarter with an overall portfolio occupancy of 92.5%, down from the 93.5% recorded in the prior quarter.

The REIT also has a weighted average lease term to expiry of about 2.8 years (by gross rental income). Approximately 6.8% of total leases are up for renewal in FY16/17, down from 14% the previous quarter.

Mapletree Industrial Trust also ended the reporting quarter with an average rental rate of S$1.92 per square feet per month, unchanged compared to the previous sequential quarter. This ends a run of 11 consecutive quarter-on-quarter increases in rental rate that the REIT had put together.

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

“MIT’s [Mapletree Industrial Trust] 2QFY16/17 DPU year-on-year increase of 1.4% was underpinned by higher rental rates secured across all property segments and higher occupancy achieved at Hi-Tech Buildings.

The timely completion of Phase One of the BTS development for Hewlett-Packard marks another milestone in our strategy to grow the Hi-Tech Buildings segment. Its revenue contribution as MIT’s largest tenant will help to mitigate the negative impact of the weak Singapore industrial market on the portfolio.”

Speaking on the REIT’s future, management expects conditions to remain challenging:

“The business environment is expected to remain challenging in view of the uncertain macroeconomic environment and large impending supply of industrial space in Singapore. This is likely to exert pressure on occupancy and rental rates.

For 6.8% of the leases (by gross rental income) due for renewal in FY16/17, the Manager remains focused on tenant retention to maintain stable portfolio occupancy.”

Mapletree Industrial Trust’s units opened at a price of $1.72 each today. This translates to a historical price-to-book ratio of under 1.26 and a distribution yield of around 6.6%.

For more investing insights and to keep up to date on the latest financial and stock market news, sign up for a FREE subscription to The Motley Fool's weekly investing newsletter, Take Stock Singapore

Also, like us on Facebook to follow our latest hot articles. The Motley Fool's purpose is to help the world invest, better.

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.