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Mapletree Industrial Trust’s Latest Earnings: Distribution Holds Steady But Challenging Times Ahead Expected

Credit: Axisadman

Yesterday evening, Mapletree Industrial Trust  (SGX: ME8U) released its third-quarter earnings report for its financial year ending 31 March 2017 (FY16/17). The reporting period is from 1 October 2016 to 31 December 2016.

As it name implies, the REIT focuses on the industrial sector and has 85 properties in Singapore that are valued at $3.6 billion as of 31 March 2016. You can learn more about the REIT in here or catch the results from the previous quarter here.

Financial highlights

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

  1. Gross revenue rose to S$84.5 million in the third quarter, up 1.4% from the same quarter the year before.
  2. Net property income (NPI) increased by 2.5% year-on-year to S$63.4 million.
  3. Distribution per unit (DPU) for the reporting quarter was 2.83 cents, up from the DPU of 2.82 cents in FY15/16’s third quarter.
  4. As mentioned earlier, Mapletree Industrial Trust’s properties are valued at S$3.6 billion as of 31 March 2016. The REIT ended its reporting quarter with a net asset value per unit of $1.37, up 3% from a year ago.

Beyond these, Foolish 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:

2017-01-24 Mapletree Industrial Trust Debt Table
Source: Mapletree Industrial Trust’s earnings presentations

Mapletree Industrial Trust’s debt profile took some small backward steps over the past year. The weighted average all-in funding cost ticked up to 2.6% while the interest coverage ratio slipped to 7.8. Moreover, the total debt load had increased, the weighted average tenor of debt had dipped, and the aggregate leverage ratio had inched up slightly.

Mapletree Industrial Trust also said that 67% of its debt are on fixed interest rates at the moment, down from the selfsame figure of 85.6% from FY15/16’s third quarter.

The REIT has 2.8% of its total loans coming due during the current fiscal year, so there isn’t much refinancing needed to be done in the near-term. But, Foolish investors should still keep a watchful eye on the progress in the  refinancing of the REIT’s debt.

Operational highlights and a future outlook

Mapletree Industrial Trust ended the reporting quarter with an overall occupancy rate of 92.1%, down from the 92.5% recorded in the prior quarter and the 94.7% seen a year ago.

The REIT also ended the reporting quarter with a weighted average lease term to expiry of about 3.2 years (by gross rental income). Approximately 2.7% of total leases are up for renewal in FY16/17, down from 6.8% in the previous quarter.

Mapletree Industrial Trust ended the quarter with an average rental rate of S$1.93 per square feet per month, up from the S$1.89 seen in the same quarter a year ago and the S$1.92 recorded in the previous sequential quarter.

Tham Kuo Wei, the chief executive of Mapletree Industrial Trust’s manager, summarised the reporting quarter with the following statement:

“The commencement of revenue from Phase One of the BTS development for Hewlett-Packard is a timely contribution to the portfolio amid the challenging operating environment. The lease commitment of 10.52 years with Hewlett-Packard increased the portfolio’s weighted average lease to expiry to 3.2 years as at 31 December 2016 from 2.8 years in the preceding quarter end.

With a low aggregate leverage ratio of 29.4%, MIT remains focused on executing existing development initiatives and pursuing investment opportunities to create value for Unitholders.”

Regarding the REIT’s outlook, management expects conditions to remain tough:

“The business environment remains challenging given the global uncertainties and rising interest rates. The continued supply of competing industrial space in Singapore and movement of tenants are expected to exert pressure on rental and occupancy rates.

The Manager continues to focus on tenant retention to maintain a stable portfolio occupancy.”

Mapletree Industrial Trust’s units closed at a price of $1.645 each on Tuesday. This translates to a historical price-to-book ratio of under 1.2 and a distribution yield of around 6.9%.

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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.