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Singapore’s Next Blue Chip Idol: Mapletree Industrial Trust

Mapletree Industrial Trust (SGX: ME8U) is one of the five reserve companies for the Straits Times Index (SGX: ^STI). In other words, should any of the 30 blue chip companies drop out from the index, Mapletree Industrial Trust would be one of the candidates to replace them. Its peer, Mapletree Commercial Trust (SGX: N2IU), is also on the reserve list.

Let’s find out more about the real estate investment trust (REIT).

A Closer Look

Mapletree Industrial Trust is the owner of 86 industrial properties in Singapore and 14 data centres in the United States (US). The REIT’s Singapore properties are well-diversified in type, ranging from hi-tech buildings, flatted factories, business parks, stack-up/ramp-up buildings and light industrial buildings.

Next, let’s have a look at its financials to see how it has been doing. First up, we have the REIT’s distributable income and distribution per unit (DPU).

 Source: Mapletree Industrial Trust earnings presentation

The table above shows that Mapletree Industrial Trust has grown its distributable income and distribution per unit (DPU) steadily over many quarters.

That said, there was a dip in DPU in the third quarter and fourth quarter of the financial year ending 31 March 2018 (FY17/18).The decline was due to a private placement which was used to fund the acquisition of the US data centres. [For a better comparison, Mapletree Industrial Trust’s DPU for the second quarter of FY17/18 included a 0.17 cent contribution which came from a pre-termination compensation. Excluding the one-off contribution, FY17/18’s second-quarter DPU would have been 2.83 cents, and FY17/18’s third-quarter DPU would have been up 1.8% sequentially.]

In terms of growth, Mapletree Industrial Trust’s distributable income grew at a compound annual growth rate (CAGR) of 6.8% while its DPU grew at a CAGR of 4.3% over the past five fiscal years. The difference in growth trajectory is due to the increase in the total number of units.

Next, let’s look at the REIT’s debt profile.

Source: Mapletree Industrial Trust’s earnings presentation

Mapletree Industrial Trust has to refinance 15.2% of its debt in FY18/19 followed by another 17.8% of its debt in FY19/20.

As it stands, Mapletree Industrial Trust’s debt is made up of bank borrowings and multi term notes (MTN). As a whole, the trust’s debt has a weighted average tenor of 3.3 years. The REIT’s aggregate leverage stood at a comfortable 33.1% with an average cost of debt at 2.9%. Meanwhile, 85.1% of its borrowings are on fixed rate loans.

Overall, the REIT’s debt profile is well spread out with the vast majority of its debt on fixed rates. That would indicate that the REIT should be able to refinance it debt comfortably as it comes due.

To close, we can take a look at the REIT’s net asset value (NAV).

Source:  Mapletree Industrial Trust’s Annual Report for FY17/18

We can see from the graph above that Mapletree Industrial Trust’s NAV has increased from S$1.20 in FY13/14 to S$1.47 in FY17/18, representing a 5.2% CAGR growth. The stable growth over the years shows that the REIT’s managers have been making prudent acquisitions, thus enabling its underlying assets to appreciate over the past five fiscal years.

Mapletree Industrial Trust has shown dependable growth over the past five years with strong growth in its NAV and DPU. All these signs suggest that there could be many more years of growth ahead if the managers are able to continue to execute into the future.

[Editor’s note: the article has been corrected on 3 October 2018 to add context to the sequential decline in Mapletree Industrial Trust’s DPU for the third quarter of FY17/18]  

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The Motley Fool Singapore contributor Esjay contributed to this article. Esjay owns shares in Mapletree Commercial Trust.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore has recommended shares of Mapletree Commercial Trust and Mapletree Industrial Trust. Motley Fool Singapore writer Chin Hui Leong does not own any of the shares mentioned.