THE SINGAPOREAN INVESTOR

The Essentials You Need to Know about Mapletree Industrial Trust's Q2 and 1H FY2024/25 Results

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Publish date: Wed, 30 Oct 2024, 10:23 AM
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My name is Jun Yuan, and I am the owner of The Singaporean Investor. I am a full-time retail investor and trader since April 2017, and in this website, I'd be sharing with you my personal analyses of Singapore-listed companies, along with advices relating to investing, as well as trading. You can find out more about me here, and check out my long-term portfolio here.
The Essentials You Need to Know about Mapletree Industrial Trust's Q2 and 1H FY2024/25 Results

There are 3 Mapletree REITs listed on the Singapore Exchange, and they are all constituents of the benchmark Straits Times Index (STI).

Mapletree Logistics Trust was the first to release its results for the 2nd quarter and 1st half of FY2024/25 ended 30 September last Tuesday (22 October), followed by Mapletree Pan Asia Commercial Trust 2 days later (24 October). You can find my reviews via the respective links below:

Mapletree Industrial Trust (SGX: ME8U), or MIT for short, is the last of the trio of Mapletree REITs to release its results yesterday (29 October) evening.

For starters, the blue-chip REIT invests in industrial (which includes hi-tech buildings, business park buildings, flatted factories, stack-up/ramp-up buildings, and light industrial buildings), along with data centre properties. As of 30 September 2024, MIT's portfolio comprises 59 properties in North America (including 13 data centres held through the joint venture with its Sponsor, Mapletree Investments Pte Ltd), 83 properties in Singapore, and 1 property in Japan, worth a total of S$8.9 billion.

In this post, you will find my review of MIT's latest financial figures, portfolio occupancy and debt profile, as well as its distribution payout to unitholders.

Let's begin:

Key Financial Figures (Q2 FY2023/24 vs. Q2 FY2024/25, and 1H FY2023/24 vs. 1H FY2024/25)

In this section, you will find a review of MIT's key financial figures reported for the 2nd quarter and for the 1st half of FY2024/25, compared against that reported in the corresponding periods last year:

Q2 FY2023/24 vs. Q2 FY2024/25:

Q2 FY2023/24Q2 FY2024/25% Variance
Gross Revenue
(S$’mil)
$174.1m$181.4m+4.2%
Property Operating
Expenses (S$’mil)
$45.6m$46.9m+3.0%
Net Property
Income (S$’mil)
$128.6m$134.5m+4.6%
Distributable Income
to Unitholders
(S$’mil)
$94.3m$96.4m+2.2%

My Observations: Overall, it was a stable set of results for the 2nd quarter reported by MIT.

Gross revenue saw a 4.2% year on year increase to S$181.4 million, as a result of contributions from Osaka Data Centre, which was acquired in September 2023, along with new leases and renewals across the various property clusters. However, this was partially offset by the loss of income in the North American portfolio due to the non-renewal of leases and divestment of the Tanglin Halt Cluster in March 2024.

As a result of a lower percentage increase in its property operating expenses (by 3.0% on a year-on-year basis, from higher property taxes, marketing costs, and property maintenance costs) compared its gross revenue (which grew by 4.2% on a year-on-year basis), its net property income saw a 4.6% year on year improvement to S$134.5 million.

1H FY2023/24 vs. 1H FY2024/25:

1H FY2023/241H FY2024/25% Variance
Gross Revenue
(S$’mil)
$344.7m$356.7m+3.5%
Property Operating
Expenses (S$’mil)
$85.3m$89.7m+5.1%
Net Property
Income (S$’mil)
$259.4m$267.0m+2.9%
Distributable Income
to Unitholders
(S$’mil)
$184.2m$194.4m+5.5%

My Observations: Similar to its financial performance for the 2nd quarter, MIT's financial performance for the 1st half of FY2024/25 compared against the same time period last year was also a stable one, with year-on-year improvements recorded in its gross revenue, net property income, as well as in its distributable income to unitholders.

The 3.5% year-on-year increase in its gross revenue to S$356.7 million was due to contributions from Osaka Data Centre and new leases and renewals across various property clusters, offset by the loss of income in its North American portfolio due to non-renewal of leases, and the divestment of the Tanglin Halt Cluster.

As a result of a higher percentage increase in its property operating expenses (by 5.1% on a year-on-year basis, from higher property taxes, property maintenance, and marketing costs for the new leases and renewals) compared to the percentage increase in its gross revenue (by 3.5% on a year-on-year basis), its net property income went up by 2.9% year on year to S$267.0 million.

Portfolio Occupancy Profile (Q1 FY2024/25 vs. Q2 FY2024/25)

Over the quarters, MIT have maintained its portfolio occupancy at above 90% – which is something I desire.

Has it managed to continue maintaining its portfolio occupancy at such levels in the current quarter under review (i.e., Q2 FY2024/25 ended 30 September)? Let us find out in the table below, where I will be comparing the stats against that reported in the previous quarter 3 months ago (i.e., Q1 FY2024/25 ended 30 June):

Q1 FY2024/25Q2 FY2024/25
Portfolio Occupancy
(%)
91.9%92.9%
Portfolio WALE (by
Gross Rental Income – years)
4.60 years4.40 years

My Observations: The 1.0 percentage point (pp) improvement in MIT's portfolio occupancy to 92.9% can be attributed to improvements in the occupancy rates of all of its property clusters except for its flatted factories (where its occupancy rate inched down from 98.0% from Q1 FY2024/25 to 97.7% in Q2 FY2024/25).

The average rental rate per month have also improved by 9.7% compared to the previous quarter to US$2.48 (from US$2.26).

Lease expiries are also well-spread out, with 7.7% of leases due for renewal in the 2nd half of FY2024/25, an average of 18.1% of leases due for renewal each year between FY2025/26 and FY2027/28 (a period of 3 years), with 37.9% of leases only due for renewal in FY2028/29 or later.

Finally, the REIT's top 10 tenants contributed about 30.2% towards its gross rental revenue, with its largest tenant in HP contributed 6.0% towards its gross rental revenue, and the remaining tenants contributing less than that.

Debt Profile (Q1 FY2024/25 vs. Q2 FY2024/25)

MIT also has a healthy debt profile, with its aggregate leverage maintained at just under 40%, and at the same time, having a high percentage (above 80%) of its borrowings hedged at fixed rates, which helps to mitigate some of the impacts of the high interest rate environment on its distribution payout.

In the table below, you'll find a comparison of MIT's debt profile for the current quarter under review, against that reported in the previous quarter 3 months ago:

Q1 FY2024/25Q2 FY2024/25
Aggregate Leverage
(%)
39.1%39.1%
Interest Coverage
Ratio (times)
4.7x4.7x
Average Term to
Debt Maturity (years)
3.6 years3.4 years
Average Cost of
Debt (%)
3.2%3.2%
% of Borrowings Hedged
to Fixed Rates (%)
82.1%80.1%

My Observations: MIT's debt profile is more or less the same as the previous quarter.

Its aggregate leverage, at 39.1%, is a safe distance to the regulatory limit of 50%. No doubt its percentage of borrowings hedged to fixed rates have dipped slightly, but at 80.1%, it is still at a very high level.

In terms of debt maturity, it is well-spread out – for the 2nd half of the current financial year 2024/25, it has 5% of borrowings due for refinancing; between FY2025/26 and FY2028/29 (a period of 4 years), it has an average of 20.5% of borrowings due for refinancing each year; the remaining 13% of borrowings will only be due for refinancing in FY2030/31 or later.

Distribution Payout to Unitholders

Similar to the other 2 Mapletree REITs, the management of Mapletree Industrial Trust also declares a distribution payout to the unitholders on a quarterly basis – which is something I like, as it gives me a more regular stream of income.

For Q2 FY2024/25, a distribution payout of 3.37 cents/unit was declared. Compared to its payout of 3.32 cents/unit a year ago, this represented a slight 1.5% improvement, as a result of an improvement in net interest income, together with the distribution of a net divestment gain of S$13.4 million from 115A & 115B Commonwealth Drive over 4 quarters from Q1 FY2024/25 to Q4 FY2024/25.

Just like in the previous quarter, distribution reinvestment plan will be applied – meaning you have the choice of receiving all your distribution in cash (which will be the default if you do not indicate any choices), in units of the REIT, or a mixture of both. More details will be made available in due course.

If you are a unitholder of MIT, do take note of the following dates on its distribution payout:

Ex-Date: 06 November 2024
Record Date: 07 November 2024
Payout Date: 18 December 2024

CEO Ms Lily Ler's Comments & Outlook (from the REIT's Press Release)

"Despite the challenging macroeconomic environment, MIT's portfolio demonstrated resilience with higher occupancies and positive rental revisions. We continue to pursue strategic acquisitions and divestments of non-core assets to reshape MIT's portfolio of assets for higher value use. This is underscored by MIT's acquisition of a freehold property in West Tokyo, which offers potential redevelopment opportunity into a new data centre."

Closing Thoughts

On the whole, it was a stable set of results reported by the blue chip industrial and data centre REIT.

Its financial performance and distribution per unit (for the 2nd quarter, as well as for the 1st half of the financial year 2024/25) saw a low single-digit percentage growth. Portfolio occupancy was also maintained at a high level of 92.9%, with a 9.7% improvement in terms of average rental rate per month compared to the previous quarter 3 months ago (i.e., Q1 FY2024/25). Finally, its debt profile was also a healthy one, with its aggregate leverage 39.1%, with slightly more than 80% of borrowings hedged at fixed rates.

Personally, I am satisfied with the REIT's latest 'report card', given that acquisition activities are low due to interest rates remaining high, and that MIT is one of the few REITs to have recorded an improvement in its financial results, as well as distribution payout.

With that, I have come to the end of my review of Mapletree Industrial Trust's latest results for the 2nd quarter, as well as for the 1st half of the financial year ended 30 September. I hope the review have given you a good understanding of MIT's latest results, but do note that all the opinions above are purely mine which I'm sharing for educational purposes only. They are not meant as any buy or sell calls for the REIT's units. You should always do your own due diligence before you make any investment decisions.

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Disclaimer: At the time of writing, I am a unitholder of Mapletree Industrial Trust.

The post The Essentials You Need to Know about Mapletree Industrial Trust's Q2 and 1H FY2024/25 Results first appeared on The Singaporean Investor.

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