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Better Buy: Ascendas REIT vs. Mapletree Industrial Trust

With real estate investment trusts (REITs) forming a large part of the stock market in Singapore, it’s worth comparing the attributes of some of the larger REITs in the market. So I thought I’d look at two of the largest industrial REITs in Singapore; Ascendas Real Estate Investment Trust (SGX: A17U) and Mapletree Industrial Trust (SGX: ME8U).

Both have market capitalisations of over S$3 billion, although Ascendas is the only one of the two that’s a Straits Times Index constituent stock. Let’s take a look in further detail at which one offers investors the better prospects.

DPU growth and yield

Ascendas and Mapletree Industrial both have strong track records in growing their distribution per unit (DPU) over the years. Let’s start with Ascendas. It has grown its full-year DPU from 13.56 cents in FY11/12 to 16.04 cents in FY18/19 – giving it a compound annual growth rate (CAGR) during the period of 2.4%. Meanwhile, Mapletree Industrial grew its DPU from 8.41 cents in FY11/12 to 12.16 cents in FY18/19, delivering a CAGR in its DPU of 5.4% over the same period.

In terms of yield, on a trailing 12-month basis Ascendas is yielding 5.2% at its current unit price of S$3.12 while Mapletree Industrial’s distribution yield is 5.5% based on its latest unit price of $2.23. Clearly, Mapletree Industrial comes out on top here.

Winner: Mapletree Industrial Trust

Gearing ratio

Given REITs rely partly on taking on debt to fund growth, it’s important that we ask how leveraged a REIT is before we decide to invest. Although the MAS sets a regulatory ceiling of 45% on gearing, it’s preferable to find a REIT that is comfortably below that.

In terms of leverage, Ascendas had a gearing ratio of 36.3% as of 31 March 2019. This was higher, though, when compared to Mapletree Industrial which had a gearing ratio of 33.8% as of 31 March 2019.

Winner: Mapletree Industrial Trust

Portfolio strength

Gauging the strength of a REIT’s portfolio can also be helpful in deciding how robust its assets are. Here, we can take a look at the weighted average lease to expiry (WALE) – in short, the longer it is, the better. On this front, Ascendas’s portfolio WALE of 4.2 years is superior to Mapletree Industrial’s portfolio WALE of 3.6 years.

Winner: Ascendas REIT

Foolish takeaway

Overall, I think Mapletree Industrial is the stronger of the two industrial heavyweight REITs. Another aspect I like about Mapletree Industrial is that it pays distributions every quarter (so four times a year) whereas Ascendas pays semi-annually (twice a year). However, investors should fully research a REIT’s overall operating business before making any decision to invest.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended the shares of Ascendas Real Estate Investment Trust and Mapletree Industrial Trust. Motley Fool Singapore contributor Tim Phillips owns shares in Ascendas Real Estate Investment Trust and Mapletree Industrial Trust.