Mapletree Industrial Trust’s Share Price is Near its 1-Year Peak: Is it Still a Good Time to Invest?

January 23, 2024

Mapletree Industrial Trust (SGX: ME8U), often abbreviated as MIT, has emerged as a significant player in the industrial REIT sector, drawing considerable attention from the investment community for its remarkable market performance.

As of 30 September 2023, MIT’s diverse portfolio spans 56 properties in the United States, 85 in Singapore, and one in Japan, with its assets under management (AUM) standing at an impressive S$9.2 billion.

With the trust’s share price currently at S$2.45, nearing its one-year high of S$2.51, the question arises: is it still an opportune time to invest in MIT? To assess this, we look into several key aspects:

1. Portfolio Diversification and Expansion

MIT’s strategic diversification across various geographical regions and its investment in high-growth sectors like data centers has broadened its market presence and minimised specific regional or sectoral risks.

MIT’s portfolio is a testament to its versatility, encompassing a wide array of industrial properties. These include cutting-edge data centers, state-of-the-art hi-tech buildings, dynamic business park buildings, traditional flatted factories, practical stack-up/ramp-up buildings, and efficient light industrial buildings.

2. Resilient financial performance

The diversified portfolio underpinned a resilient and robust financial performance in 2023 despite a challenging operating environment characterized by persistent inflation and rising interest rates leading to increased borrowing costs.

Its recent financial performance in H1 FY2024 revealed a slight year-on-year (yoy) increase in gross revenue to S$344.7 million. However, its net property income (NPI) saw a marginal decline to S$259.4 million due to increased operating expenses.

The Distribution per Unit (DPU) for the period was reported at S$0.0671, reflecting a 2% decrease yoy attributed to an enlarged unit base.

Nevertheless, the trust’s trailing 12-month DPU stands at S$0.1343, translating into a compelling trailing distribution yield of 5.4%.

3. Rapid growth in data center sector

The trust’s focus on the rapidly growing data center sector, propelled by the global surge in cloud computing and data storage needs, positions MIT favourably for future expansion.

As of 30 September 2023, about 56% of MIT’s portfolio is in the data center segment.

There are 56 data centers across North America with an average occupancy rate of 92.7%.

4. Strong Occupancy and Rental Reversions

With an occupancy level of 93.2% and a positive portfolio weighted average rental reversion of 8.8%, MIT demonstrates a healthy demand for its properties and the ability to increase rents upon lease renewals.

5. Recent Strategic Acquisitions

The acquisition of a data center in Osaka, which is expected to contribute to the trust’s earnings in the forthcoming quarters, underscores MIT’s commitment to enhancing its income potential.

Additionally, its gearing ratio stands at a fair 37.9%, providing ample room for further debt-driven, yield-accretive acquisitions.

Invest in MIT for its attractive yield and growth potential in data centers

In conclusion, while Mapletree Industrial Trust’s share price is approaching its one-year peak, the trust’s strategic approach, consistent performance, and promising prospects in high-growth sectors continue to make it an attractive investment option.

For investors seeking a blend of stability, growth, and income, MIT offers a compelling case for inclusion in a diversified investment portfolio in the REIT sector.

Disclaimer: ProsperUs Head of Content & Investment Lead Billy Toh doesn’t own shares of any companies mentioned.

Billy Toh

Billy is deeply committed to making investment accessible and understandable to everyone, a principle that drives his engagement with the capital markets and his long-term investment strategies. He is currently the Head of Content & Investment Lead for Prosperus and a SGX Academy Trainer. His extensive experience spans roles as an economist at RHB Investment Bank, focusing on the Thailand and Philippines markets, and as a financial journalist at The Edge Malaysia. Additionally, his background includes valuable time spent in an asset management firm. Outside of finance, Billy enjoys meaningful conversations over coffee, keeps fit as a fitness enthusiast, and has a keen interest in technology.

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