Mapletree Industrial Trust (SGX: ME8U) Share Price At S$2.77: Is This A Buy?
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Mapletree Industrial Trust (SGX: ME8U) Share Price At S$2.77: Is This A Buy?

Sudhan P
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Right now, Mapletree Industrial Trust (SGX: ME8U) share price (technically known as unit price for REITs) is at S$2.77. 

Does the REIT look like a buy at its current unit price?

Let’s explore using my 10-step guide to pick the best Singapore REITs.

How to pick the best REITs

As a summary, here are the 10 steps I use to pick the best Singapore REITs:

  1. Growth in Gross Revenue and Net Property Income
  2. Growth in Distribution Per Unit
  3. Property Yield of Between 5% and 9%
  4. Gearing Ratio of Below 40%
  5. Interest Coverage Ratio of Above 5x
  6. Healthy Portfolio Occupancy Rate
  7. Positive Rental Reversions
  8. Presence of Growth Prospects
  9. Acceptable Price-to-Book Ratio
  10. Distribution Yield of Above 5%

Business Background

Before we go into an analysis of Mapletree Industrial Trust, let’s take a quick look at what its business is about.

Mapletree Industrial Trust is a REIT with a portfolio of 87 industrial properties in Singapore and 17 data centres in North America (through the joint ventures with its sponsor, Mapletree Investments), as of 31 December 2019. The properties in Singapore range from hi-tech buildings to light industrial buildings.

Mapletree Industrial Trust portfolio as of 31 Dec 2019
Source: Mapletree Industrial Trust earnings presentation

On 14 January 2020, Mapletree Industrial Trust completed the acquisition of 10 more data centres in North America, bringing the total number of data centres it owns to 27.

Sponsor Mapletree Investments owns 29.2% of Mapletree Industrial Trust. 

1. Gross Revenue and Net Property Income (NPI) Check

Check for: Increasing gross revenue and NPI

Mapletree Industrial Trust has a financial year that ends on 31 March each year. 

The following table showcases the REIT’s gross revenue and NPI growth over the last couple of years:

 FY14/15FY15/16FY16/17 FY17/18FY18/19Compound Annual Growth Rate (CAGR)
Gross revenue
(S$' million)
313.9331.6340.6363.2376.14.6%
Net property income
(S$' million)
228.6245.1256.8277.6287.85.9%

It’s nice to see both gross revenue and NPI growing steadily each year from FY14/15 to FY18/19. 

Verdict: Pass

2. Distribution Per Unit (DPU) Check

Check for: Increasing DPU

Mapletree Industrial Trust’s DPU has also been increasing from FY14/15 to FY18/19.

 FY14/15FY15/16FY16/17 FY17/18FY18/19CAGR
Distribution per unit (Singapore cents)
10.4311.1511.3911.7512.163.9%

Over the longer term, since its listing in October 2010, Mapletree Industrial Trust’s DPU has risen from 1.52 Singapore cents.

Mapletree Industrial Trust DPU growth
Source: Mapletree Industrial Trust earnings presentation

Verdict: Pass

3. Property Yield Check 

Check for: Property yield of between 5% and 9%

For FY18/19, Mapletree Industrial Trust had an NPI of S$287.8 million and a portfolio value of S$4.34 billion. The figures translate to a property yield of 6.6%.

Mapletree Industrial Trust passes this criterion with flying colours. 

Verdict: Pass

4. Gearing Ratio Check

Check for: Gearing ratio below 40%

As of 31 December 2019, Mapletree Industrial Trust’s gearing ratio stood at 34.1%, which is well below the regulatory limit of 45% and below my threshold of 40%. 

Mapletree Industrial Trust gearing ratio
Source: Mapletree Industrial Trust earnings presentation

Verdict: Pass

5. Interest Coverage Ratio Check

Check for: Interest coverage ratio above 5 times

Mapletree Industrial Trust’s interest coverage ratio was 6.8 times, as of end-2019, and that’s well above 5 times. 

Mapletree Industrial Trust interest cover
Source: Mapletree Industrial Trust earnings presentation

Verdict: Pass

6. Portfolio Occupancy Rate Check

Check for: Healthy portfolio occupancy rate

Mapletree Industrial Trust’s overall portfolio occupancy for the third quarter of FY19/20 rose to 90.9%, compared to 90.5% in the preceding quarter.

The increase was due to higher occupancy at both Mapletree Industrial Trust’s Singapore portfolio and US portfolio.

The Singapore portfolio saw its occupancy increase to 90.5%, up from 90.2% in the second quarter of FY19/20.

Mapletree Industrial Trust Singapore portfolio occupancy (as of 31 Dec 2019)
Source: Mapletree Industrial Trust earnings presentation

Meanwhile, the US portfolio saw an increase in occupancy rate from 97.4% in 2Q FY19/20 to 97.8% in 3Q FY19/20.

Verdict: Pass

7. Rental Reversion Check

Check for: Positive rental reversions

Mapletree Industrial Trust’s Singapore portfolio gross rental rate has grown over the years, and for its latest quarter, it was 3.9% higher year-on-year. 

Mapletree Industrial Trust rental rates
Source: Mapletree Industrial Trust earnings presentation

The data centres portfolio comes with rental escalations, so there’s organic growth for the REIT from this.

Verdict: Pass

8. Growth Prospects Check

In its FY18/19 annual report, Mapletree Industrial Trust’s manager said the following about the US data centre sector:

“Demand for data centre space in the United States remained strong, backed by growth in data consumption as well as increasing adoption of cloud services by businesses and consumers. These will underpin the stability of revenue contribution from the US Portfolio.”

On that front, the REIT has expanded its footprint in the North America data centre space with the acquisition of 13 data centres.

Mapletree Industrial Trust data centre acquisition
Source: Mapletree Industrial Trust earnings presentation

Mapletree Industrial Trust’s sponsor has granted the REIT the right of first refusal for its remaining stake in the data centres, providing significant investment pipeline.

In Singapore, Mapletree Industrial Trust is embarking on its largest redevelopment project at Kolam Ayer, which is expected to be completed in the second half of 2022. The built-to-suit facility is 100% committed to a global medical device company headquartered in Germany. The initial lease term is 15 years with annual rental increases.

Mapletree Industrial Trust growth prospects
Source: Mapletree Industrial Trust earnings presentation

For FY19/20, Mapletree Industrial Trust could see higher gross revenue as compared to a year back due to new revenue contributions from 18 Tai Seng, 30A Kallang Place, Mapletree Sunview 1 and 7 Tai Seng Drive.

Mapletree Industrial Trust portfolio growth since IPO
Source: Mapletree Industrial Trust investor presentation

Verdict: Pass

9. Price-to-Book Ratio Check

Check for: Acceptable price-to-book ratio 

At Mapletree Industrial Trust’s unit price of S$2.77, it is valued at a PB ratio of 1.8x.

Over the past five years, its average PB ratio stood at 1.3x.

With the current PB ratio above its mean, Mapletree Industrial Trust looks expensive to me.

Verdict: Fail

10. Distribution Yield Check

Check for: Distribution yield to be above 5% 

At Mapletree Industrial Trust’s unit price of S$2.77, it has a distribution yield of 4.5%, which is low in my opinion. 

Verdict: Fail

The Final Verdict

Mapletree Industrial Trust has a final score of 8/10.

I like Mapletree Industrial Trust for its:

  • Growing gross revenue, NPI and DPU over the years;
  • Strong balance sheet;
  • High occupancy rate; and 
  • Long runway for growth.

However, as we have seen with many great Singapore REITs such as Ascendas REIT, CapitaLand Mall Trust, and Mapletree Logistics Trust, they have high valuations, and Mapletree Industrial Trust is no exception. 

Therefore, I’m placing Mapletree Industrial Trust on my watchlist. 

Want To Leave Your Thoughts on Mapletree Industrial Trust?

Why not check our Seedly Community and drop your question or analysis on Mapletree Industrial Trust there.

Stock Discussion on Mapletree Industrial Trust

Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. ​Readers should always do their own due diligence and consider their financial goals before investing in any stock. 

About Sudhan P
It isn't fair competition when only one company in the world makes Monopoly. But I love investing in monopolies. Before joining the Seedly hood, I had the chance to co-author a Singapore-themed investment book – "Invest Lah! The Average Joe's Guide To Investing" – and work at The Motley Fool Singapore as an analyst.
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