Mapletree Logistics Trust’s Latest Earnings: 4 Key Points To Note

2021-02-05     thesmartinvestor
Mapletree Logistics Trust’s Latest Earnings: 4 Key Points To Note

The world is still grappling with a rise in COVID-19 infections despite the rollout of vaccines.

The resurgence of the virus has led Singapore to urgently rescind green lane travel agreements with Germany, Malaysia and the Republic of Korea.

With a dark cloud of uncertainty hanging over the next few months, investors might want to add a touch of resilience to their investment portfolios.

A couple of REITs have weathered the pandemic admirably, and recently announced higher distributions to unitholders.

One of them is Mapletree Logistics Trust (SGX: M44U), or MLT.

The industrial REIT recently released its results for the quarter ended 31 December 2020, and here are four key points investors should take note of.

Occupancy remains high

MLT reported an overall portfolio occupancy of 97.1% as of 31 December, a slight dip from 97.5% three months prior.

It should be noted that MLT’s portfolio occupancy would have been 97.4% if we exclude the newly acquired Higashi Hiroshima Centre in Japan from the calculations.

As of 31 December, the Japanese property only had an occupancy of 33%.

But investors should not be overly alarmed as Higashi Hiroshima Centre was newly completed in November 2020.

The property is located near to Hiroshima city centre and Hiroshima Airport, an ideal location for a regional distribution hub.

With the strategic location, MLT believes that the property will enjoy healthy leasing demand in the future.

Robust WALE

MLT also reported a relatively healthy weighted average lease expiry (WALE) of 3.7 years.

By net lettable area (NLA), 6% of leases will be expiring in MLT’s final quarter of fiscal year (FY) 20/21.

A further 26.5% of leases by NLA will be up for renewal in FY 21/22.

Unitholders will be watching out for the direction of rental reversions when these leases are renegotiated.

In the most recent quarter, MLT reported positive rental reversions of 1.6%.

With the logistics sector seeing an uptick for demand, the upward trend for rentals should continue.

NPI and DPU increase

Encouragingly for unitholders, MLT reported gross revenue of S$139.9 million for the quarter, a year on year improvement of 15.5%.

Correspondingly, net property income also rose by 14.9% year on year to S$124.7 million.

The improved performance can be drilled down to contributions from redeveloped assets as well as accretive acquisitions.

In line with the better results, MLT declared a distribution per unit (DPU) of S$0.02065, a 0.5% increase from the same period a year ago.

With this quarterly DPU announced, MLT will distribute a total of S$0.06165 for the first nine months of FY20/21, representing a year on year increase of 1.2%.

This increase in DPU means that MLT looks set to continue its track record of increasing distributions every year since 2016.

Acquisitions bearing fruit

In the recent quarter, MLT completed a massive billion-dollar acquisition.

Beyond providing additional income that helped the REIT raise its DPU, the new properties also added geographic concentration and reduced customer concentration risk for MLT’s portfolio.

By geography, MLT’s exposure to its largest market, Singapore, has been reduced from 34% to 32.3% post-acquisition.

Revenue contribution from MLT’s largest tenant, CWT Pte Ltd, has also been diluted from 8.6% to 7.6%.

The REIT now has an extensively diverse portfolio featuring 739 tenants across 156 properties in eight countries..

But MLT may not be done with acquisitions.

Despite the huge billion-dollar outlay for its recent acquisitions, MLT’s gearing ratio declined to 36.8%, from 39.5% in the previous quarter.

The REIT’s gearing was reduced as its shopping spree was bankrolled mainly by equity fundraising.

With the REIT’s gearing still well below the MAS limit of 50%, MLT still has plenty of headroom to make even more DPU-accretive acquisitions through debt funding to add further strength and diversity to its portfolio.

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Disclosure: Herman Ng does not own shares in any of the companies mentioned.

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