Mapletree Industrial Trust (SGX: ME8U) created history this week.
On Monday, Mapletree Industrial Trust became part of the Straits Times Index, booting out media giant, Singapore Press Holdings (SGX: T39).
And on Tuesday, the industrial real estate investment trust (REIT) announced its decision to acquire the remaining 60% interest in 14 data centres in the US.
If you are thinking of investing in Mapletree Industrial Trust now that it’s part of the “big boys league” and is officially a blue-chip stock, here’s a quick guide for you on the REIT.
Previously, in our 60-second guide series, we featured Oversea-Chinese Banking Corp Limited (SGX: O39), one of Singapore’s major banks.
What’s Mapletree Industrial Trust’s Business About?
Mapletree Industrial Trust, which was listed in 2010, owns a total of 114 industrial properties and data centres in Singapore and the US.
On 23 June 2020, Mapletree Industrial Trust said that it’s expanding its data centre footprint in the US by acquiring the remaining 60% interest in 14 data centres in the country at a price of US$210.9 million.
In a press release, Tham Kuo Wei, chief executive of Mapletree Industrial Trust’s manager, explained its rationale for the purchase:
“The Proposed Acquisition increases our exposure to the resilient data centre segment and deepens our presence in the United States. The United States is the largest and most established data centre market in the world. It offers attractive growth prospects and is well supported by favourable supplydemand dynamics. The Proposed Acquisition will improve MIT’s income stability with the increased freehold land component and long leases with annual rental escalations.”
Once the acquisition goes through, Mapletree Industrial Trust’s assets under management will increase to S$6.6 billion from S$5.9 billion, as of 31 March 2020.
Mapletree Industrial Trust’s Financial Highlights
The following table shows key financial metrics of Mapletree Industrial Trust (the REIT has a 31 March year-end):
|Gross revenue |
|Net property income|
|Net asset value per unit (S$)||1.37||1.41||1.47||1.51||1.62|
We can see from the table that gross revenue and net property income (NPI) have risen consistently year-on-year from FY15/16 to FY19/20.
This speaks well of Mapletree Industrial Trust’s portfolio strength.
In FY19/20, NPI rose 10.5% year-on-year on the back of higher contributions from acquisition and development projects in Singapore –18 Tai Seng, 30A Kallang Place, 7 Tai Seng Drive, and Mapletree Sunview 1.
Mapletree Industrial Trust’s Distribution Per Unit History
With the growth in distributable income over the years, distribution per unit (DPU) has stepped up as well.
Here’s a look at Mapletree Industrial Trust’s DPU growth from FY15/16 to FY19/20:
|Distribution per unit (Singapore cents)||11.15||11.39||11.75||12.16||12.24|
Mapletree Industrial Trust’s DPU grew 2.4% annually, from 11.15 Singapore cents in FY15/16 to 12.24 Singapore cents in FY19/20.
Major Risk for Mapletree Industrial Trust to Take Note Of
The COVID-19 pandemic has battered a couple of REITs, especially those exposed to the retail sector.
Even though Mapletree Industrial Trust performed well financially for FY19/20, due to uncertainty from the coronavirus outbreak, the REIT retained around S$6.6 million for “greater flexibility in cash management”.
About 45% of Mapletree Industrial Trust’s portfolio is leased out to small and medium-sized enterprises (SME), whose businesses are more likely to be impacted by the pandemic. Things are looking brighter now with the gradual re-opening of the Singapore economy.
However, we are not totally out of the woods yet.
If the pandemic drags on, the SME tenants may seek relief under the COVID-19 (Temporary Measures) Act.
This is something that investors should be aware of for the short-term.
Mapletree Industrial Trust’s Unit Price and Valuation
Mapletree Industrial Trust’s unit price has increased by around 90% in all over the past five years.
At the time of writing, Mapletree Industrial Trust is selling at S$2.92 per unit.
At its current unit price of S$2.92, Mapletree Industrial Trust has a price-to-book ratio of 1.8 and a distribution yield of 4.2%.
The valuation looks to be on the higher side.
Therefore, potential investors should discern if it’s worth paying up for a REIT with exposure to the growing data centre industry.
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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.