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Better Buy: Mapletree Industrial Trust vs. Ascendas REIT

Singapore REITs data centre

Tim Phillips

May 31, 2021

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When long-term investors think about dividends, we automatically gravitate towards real estate investment trusts (REITs) here in Singapore.

On last week’s ProsperUs webinar about building a portfolio, in the Q&A session, I was asked about the merits of the largest Singapore industrial REIT, Ascendas REIT (SGX: A17U) as opposed to Mapletree Industrial Trust (SGX: ME8U).

Both are large and growing industrial REITs in Singapore that are popular with retail investors. Although Ascendas REIT is in fact the largest industrial REIT, with a market cap of S$12.2 billion versus Mapletree Industrial Trust’s S$6.9 billion, I feel the latter is a better option.

However, as serious long-term investors, we should always have a look at the fundamentals to determine why we have preferences. In the case of REITs, there are certain metrics to watch out for.

So, here’s a look at which is the better buy for dividend investors in Singapore: Ascendas REIT or Mapletree Industrial Trust.

DPU growth

When you buy a REIT’s unit, one of the big reasons you do so is for the passive income stream. That comes in the form of distributions (or dividends).

Otherwise known as distribution per unit (DPU), this is the key metric to watch out for in relation to the dividend. The dividend yield is actually less important than the DPU growth.

For Mapletree Industrial Trust, it paid out a DPU of 8.41 Singapore cents in FY 2011/2012 (the first full year after its listing in late 2010).

In its latest full-year which is FY2020/2021 Mapletree Industrial Trust paid out a DPU of 12.55 Singapore cents, meaning over the nine-year period it saw its DPU grow at a compound annual growth rate (CAGR) of 4.6%.

How about Ascendas REIT? It paid out a DPU of 13.56 Singapore cents in FY 2011/2012. In the full-year 2020 – it had changed its financial year to reflect a full calendar year back in 2019 – it paid out a DPU of 14.688 Singapore cents.

That means its DPU effectively had a CAGR of a meagre 0.9% over the same period (nine years). Even if we go back to 2003, when Ascendas was first listed, over the past 17 years its DPU has grown at a CAGR of a disappointing 3.6%.

Winner: Mapletree Industrial Trust

Acquisition track record

For investors, having trust in a REIT’s management to responsibly grow either organically, or inorganically, the portfolio to provide more income streams is crucial.

In Mapletree Industrial Trust’s case, their acquisition track record has been impressive. The latest one it announced was a S$1.8 billion acquisition of 29 data centres in the US.

With the acquisition being pro-forma DPU accretive (to the tune of 3.3%), unit holders know that management is growing that DPU.

In addition, the net asset value (NAV) per unit after the deal is expected to increase 6%.

Contrast this to Ascendas REIT, where its acquisition of 11 data centres in Europe – announced in March this year – is expected to boost its DPU by only 1.3%.

Or perhaps its acquisition of a 75% interest in Galaxis, a Singapore business park in One-North. That deal was even more miserly, expected to boost DPU by just 0.4% while NAV would only receive a 0.9% bump.

Winner: Mapletree Industrial Trust

Buy winners

Mapletree Industrial Trust has displayed to investors that it has been able to consistently grow its DPU at a faster rate than other industrial REITs while also being smart when acquiring new properties.

As an investor in REITs, we actually place a lot of faith in management to make the right calls when buying new properties.

Given Mapletree Industrial Trust’s early entry into the US data centre market, back in 2017, it was prescient in understanding it was an exciting growth market.

Over the years, it has proven to be a bigger winner than Ascendas REIT, both in distribution and total return terms.

Finally, Mapletree Industrial Trust pays out a dividend every three months, whereas Ascendas REIT pays a dividend twice a year, meaning the more regular income stream from the former should also appeal to dividend investors.

Disclaimer: ProsperUs Head of Content Tim Phillips owns shares of Mapletree Industrial Trust.

About the Author: Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth. He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. In his spare time, Tim enjoys running after his two year-old son, playing football and practicing yoga.