Mapletree Industrial Trust: A Summary of its Q2 and FY2020/21 Performance

This post was originally posted here. The writer, Lim Jun Yuan is a veteran community member and blogger on InvestingNote, with a username known as @ljunyuan and has 1422 followers.

Mapletree Industrial Trust is a new addition made on Monday (26 October 2020) at S$3.10, that is if you’ve been keeping tabs on my personal long-term investment portfolio (you can check it out here), you would have noticed that  Based on a distribution payout of 12.24 cents/unit in FY2019/20, even though the yield is just 3.9%, but given its track record in the management increasing its distribution payouts to its unitholders over the years, along with sound business fundamentals, I am confident of the blue-chip industrial REIT’s growth in the years ahead – I have done a writeup about the REIT last month, which you can read up here to learn more about the REIT.

After trading hours yesterday (27 October 2020), the REIT released its financial results for the second quarter of the financial year 2020/21 (it has a financial year-end every 31 March.) As a unitholder, I have studied through its latest set of financial results, debt and portfolio occupancy profile, along with its distribution payout to unitholders (the REIT is one that pays out its unitholders on a quarterly basis), and in this post, I will be sharing with you the most important aspects about its latest updates to take note of, along with my personal thoughts to share.

Let’s begin…

Financial Performance (Q2 FY2019/20 vs. Q2 FY2020/21, and 1H FY2019/20 vs. 1H FY2020/21)

In this section, we shall be looking at the REIT’s results both on a quarter-on-quarter (q-o-q) basis (Q2 FY2019/20 vs. Q2 FY2020/21), as well as on a year-on-year (y-o-y) basis (1H FY2019/20 vs. 1H FY2020/21):

Q2 FY2019/20 vs. Q2 FY2020/21:

	Q2 FY2019/20	Q2 FY2020/21	% Variance
Gross Revenue (S$’mil)	$101.9m	$103.4m	+1.5%
Property Operating Expenses (S$’mil)	$21.9m	$21.7m	-0.6%
Net Property Income (S$’mil)	$80.0m	$81.6m	+2.0%
Distributable Income to Unitholders (S$’mil)	$63.5m	$72.9m	+14.8%

 

At one glance, you can tell that the industrial REIT’s latest quarter results are a positive one compared to the same time period last year – the 1.5% y-o-y growth in its gross revenue can be attributed to the consolidation of the 14 data centers in the United States previously held under Mapletree Redwood Data Centre Trust, offset by rental reliefs for eligible tenants under the Covid-19 (Temporary Measures) (Amendment) Act, along with the decanting of tenants at Kolam Ayer 2.

The slight drop in its property operating expenses was mainly attributable to property maintenance expenses and marketing commissions.

Finally, the 14.8% q-o-q improvement in the REIT’s distributable income to unitholders was due to higher net property income, and distributions declared by joint ventures.

1H FY2019/20 vs. 1H FY2020/20:

	1H FY2019/20	1H FY2020/21	% Variance
Gross Revenue (S$’mil)	$201.4m	$202.5m	+0.5%
Property Operating Expenses (S$’mil)	$43.5m	$42.2m	-3.1%
Net Property Income (S$’mil)	$157.9m	$160.3m	+1.5%
Distributable Income to Unitholders (S$’mil)	$126.7m	$143.4m	+13.2%

 

Similar to its q-o-q performance, on a y-o-y basis, it is also an improved one – the 0.5% y-o-y growth in its gross revenue can be attributed to the consolidation of its 14 data centers in the United States; at the same time, its property operating expenses dipped by 3.1% y-o-y due to lower property maintenance expenses and marketing commissions; finally, its distributable income to unitholders saw a 13.2% y-o-y growth due to higher net property income and distributions declared by joint ventures.

My Thoughts: I’m sure you will agree with me that the latest set of financial results reported by the REIT, both on a q-o-q as well as on a y-o-y basis, is a resilient one.

Debt Profile (Q1 FY2020/21 vs. Q2 FY2020/21)

Moving on, let us take a look at the REIT’s debt profile reported for the quarter under review (i.e. Q2 FY2020/21 ended 30 September 2020), compared against the previous quarter (i.e. Q1 FY2020/21 ended 30 June 2020), to find out if it has improved or deteriorated 3 months on:

	Q1 FY2020/21	Q2 FY2020/21
Gearing Ratio (%)	38.8%	38.1%
Interest Coverage Ratio (times)	7.9x	7.0x
Average Term to Debt Maturity (years)	3.9 years	3.2 years
Average Cost of Debt (%)	2.6%	2.7%

My Thoughts: Personally, I felt that its debt profile, compared to the previous quarter, have deteriorated slightly – in that its interest coverage ratio has fallen (even though at 7.0x it remains very healthy), along with its average cost of debt edging up slightly (to 2.7% as at 30 September 2020.) The REIT does not have any debt maturing in the remaining quarters of the current financial year 2020/21.

On the other hand, the REIT’s gearing ratio has gone by by 0.7 percentage points (pp) to 38.1% – and at this percentage, it is still a safe distance away from the regulatory limit of 50.0%, and in my personal opinion, there remains plenty of debt headroom for the REIT to make further yield accretive acquisitions as and when an opportunity to do so arises.

All in all, while there are some slight negatives, the REIT’s debt profile, on the whole, is still a conservative one (in my opinion), and one that I am comfortable with as a unitholder.

Portfolio Occupancy Profile (Q1 FY2020/21 vs. Q2 FY2020/21)

Just like how I looked at the REIT’s debt profile in the previous section, I will also be comparing its portfolio occupancy profile recorded for the quarter ended 30 September 2020 (i.e. Q2 FY2020/21) against the previous quarter ended 30 June 2020 (i.e. Q1 FY2020/21), and the statistics can be found in the table below:

	Q1 FY2020/21	Q2 FY2020/21
Portfolio Occupancy (%)	91.1%	92.3%
Portfolio Weighted Average Lease Expiry (years)	4.2 years	4.2 years

 

My Thoughts: Personally, the REIT’s portfolio continues to remain resilient, with its portfolio occupancy recording a 1.2pp improvement in the current quarter under review (compared to the previous quarter 3 months ago.)

Distribution Per Unit (Q2 FY2019/20 vs. Q2 FY2020/21)

As I have mentioned at the beginning of this post, the REIT’s management declares a distribution payout to its unitholders on a quarterly basis – with that, let us take a look at its payout for the current quarter under review, compared to the same time period last year:

	Q2 FY2019/20	Q2 FY2020/21	% Variance
Distribution Per Unit (S$’cents)	3.13 cents	3.10 cents	-1.0%

 

The slight dip (of 1.0%) in the REIT’s distribution payouts was due to a lower unit base.

However, one thing to note here – if you are invested in the REIT only recently, you will only receive 3.07 cents/ unit (amount declared for the period between 02 July and 30 September), as the REIT has already paid out 0.03 cents/unit on 28 July (to unitholders on the REIT’s register as at 01 July, which was the date immediately prior to the issuance of new units pursuant to the private placement.)

If you are a unitholder of the REIT, you need to take note of the following dates:

Ex-date: 03 November 2020
Record date: 04 November 2020 at 17:00hrs
Payout date: 01 December 2020

In Conclusion

On the whole, the latest set of results reported by the blue-chip industrial REIT was a resilient one – where it saw improvements in its financial results (both on a q-o-q as well as on a y-o-y basis), along with improvements in its portfolio occupancy profile. Its debt profile also showed that there are debt headrooms available for further acquisitions to be made.

Having said that, this post is by no means a buy or sell recommendation for the REIT’s units. Please do your own due diligence before you engage in any investment decisions.

Related Documents

• Press Release

• Financial Results

• Presentation Slides

 

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