3 Things Mapletree Logistics Trust’s Management Wants You To Know About Its Business

In late April, Mapletree Logistics Trust (SGX: M44U) released its fourth quarter and full year earnings update for its fiscal year ended 31 March 2018 (FY17/18).

As a quick introduction, Mapletree Logistics Trust is a REIT that owns 124 logistics properties around Asia and Australia.

The Manager of Mapletree Logistics Trust had given a presentation on the REIT’s latest results. In the presentation deck, I saw three slides on the REIT’s business that I think investors should pay attention to.

The first slide shows a high-level summary of the REIT’s income statement for the fourth quarter of FY17/18:

Source: Mapletree Logistics Trust FY17/18 fourth quarter earnings presentation

We can see that the REIT had a good quarter as there was strong growth in gross revenue, net property income, amount distributable to unitholders, and available DPU. Mapletree Logistics Trust credited its overall performance to growth from the existing portfolio, initial contributions from a newly completed redevelopment in Singapore, as well as contributions from acquisitions.

As of 31 March 2018, the REIT’s gearing stood at 37.7%, which is within the regulatory limit of 45%. Its committed occupancy rate was also healthy at 96.6%.

The next slide I want to discuss shows a breakdown of the REIT’s occupancy rate by geography:

Source: Mapletree Logistics Trust FY17/18 fourth quarter earnings presentation

We can observe that all of the REIT’s geographical markets, with the exception of Hong Kong, had 100% or year-on-year improvement in occupancy rates. This is a sign of the strength in demand for the REIT’s properties. Mapletree Logistics Trust attributed its lower occupancy rate in Hong Kong to asset enhancement works in its Shatin No. 3 property. Excluding this, Hong Kong’s occupancy rate would have been 99.9%.

The last slide I want to talk about shows the REIT’s lease expiry profile:

Source: Mapletree Logistics Trust FY17/18 fourth quarter earnings presentation (SUA stands for single-user asset; MTB stands for multi-tenanted building)

The lease expiry profile is an important thing to study for a REIT as it gives us clues on how stable the REIT’s rental income may be.

There are two positive traits with Mapletree Logistics Trust’s lease expiry profile. Firstly, the REIT’s portfolio had a reasonable weighted average lease to expiry of 3.5 years by net lettable area as of 31 March 2018.

Secondly, the staggered nature of the REIT’s lease expiry profile reduces the pressure on the REIT to renew leases in any particular year. With more than half of Mapletree Logistics Trust’s leases expiring after FY20/21, the REIT should have reasonable visibility on its rental income stream for the next three to five years.

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