Mapletree Industrial Trust Earnings: Dividend Up Over 10%

Data centre REIT Singapore

Author: Tim Phillips

November 2, 2021

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Singapore dividend investors should be on the lookout for earnings coming from some of the city state’s biggest real estate investment trusts (REITs).

That’s because Singapore REITs reveal – amid their results – whether they have hiked their distribution per unit (DPU), which is basically another term for the dividend.

With interest rates globally still at record lows, REITs continue to maintain their appeal to Singapore investors as a source of solid passive income as opposed to owning bricks-and-mortar real estate.

The top-performing Singapore REIT you could have owned over the past decade was Mapletree Industrial Trust (SGX: ME8U), a large REIT that owns industrial properties and data centres in both Singapore and North America.

Last week, the Mapletree Investment Pte Ltd-backed REIT reported its most recent second-quarter fiscal year (FY) 2021/2022 earnings.

While the REIT raised its DPU by over 10%, there were also other things to take note of. Here’s what investors should know.

Steady but growing

As of the end of the third quarter of 2021, Mapletree Industrial Trust had 143 properties across Singapore and North America.

With total assets under management (AUM) of S$8.5 billion, the portfolio was pretty evenly split between Singapore (50.6%) and North America (49.4%).

The latter is where nearly all the REIT’s data centres are located. For the latest quarter, Mapletree Industrial Trust’s net property income was up 47.4% year-on-year to S$120.3 million.

However, given its acquisitive nature, property operating expenses also rose during the period – totalling S$35.2 million, up 62% year-on-year.

What was encouraging to see was that the REIT’s DPU for the quarter hit an all-time high of 3.47 Singapore cents, which was up a robust 11.9% year-on-year.

Mapletree Industrial Trust’s equity fundraising in Q1 FY21/22 meant that the DPU rise lagged that of the 21.3% year-on-year increase in the amount available for distribution to unitholders.

Tale of two property markets

While Mapletree Industrial’s data-centre exposure stands it in good stead for future growth, its Singapore portfolio does continue to see some weakness given the uncertainty surrounding work arrangements in a post-Covid-19 environment.

Furthermore, the longer weighted average lease expiry (WALE) of its North American data centre portfolio means the REIT’s overall WALE is dragged down by its Singapore portfolio (see below).

MIT WALE Q3 2021

Source: Mapletree Industrial Trust Q2 FY21/22 earnings presentation

However, with only just over 20% of its leases up for renewal in the next 18 months, the REIT is relatively well-protected from any volatility.

It’s also not standing still, with regards to its Singapore portfolio. Its ongoing redevelopment of Kolam Ayer 2 at Kallang Way is transforming two flatted factories and an amenity centre into new hi-tech buildings and a build-to-suit facility for a major anchor tenant.

Completions for the project are expected in phases between the second half of 2022 and first half of 2023.

Continuing to acquire

Overall, it was another solid quarter for Mapletree Industrial Trust. During the period it also completed the acquisition of 29 data centres in the US, closing the S$1.8 billion deal in late July.

The current quarter will be the first full quarter of contribution by the 29 properties to Mapletree Industrial’s earnings.

Additionally, the REIT has right-of-first-refusal (ROFR) on the 50% stake that Mapletree Investments Pte Ltd has when the pair took part in a 50:50 joint venture to acquire 13 North American data centres for US$1.37 billion.

With an attractive forward dividend yield of just over 5%, Mapletree Industrial Trust looks likely to continue posting market-beating results.

Disclaimer: ProsperUs Head of Content & Investment Lead 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.