Mapletree Industrial Trust’s 3Q FY2024 DPU Rises Quarter on Quarter to S$0.0336: 5 Highlights from the Industrial REIT’s Latest Earnings

Mapletree Industrial Trust (SGX: ME8U), or MIT, is the second Mapletree REIT to release its latest third quarter of fiscal 2024 (3Q FY2024) earnings for the period ending 31 December 2023.

Earlier this week, its sister REIT Mapletree Logistics Trust (SGX: M44U) reported a resilient set of financial numbers.

For MIT, its financial report card showed that the industrial REIT managed to weather the challenges associated with inflation and higher interest rates.

Here are five important highlights that investors should know about the industrial REIT’s latest results.

1. A quarter-on-quarter improvement in DPU

3Q FY2024 saw MIT’s gross revenue rise 2% year on year to S$173.9 million with contributions from the newly-acquired data centre in Osaka along with new leases from redevelopment project Mapletree Hi-Tech Park @ Kallang Way.

Net property income (NPI) inched up 0.8% year on year to S$129.9 million while distributable income rose 3.1% year on year to S$95.2 million.

Distribution per unit (DPU) slid 0.9% year on year to S$0.0336 because of a 4.1% year-on-year increase in MIT’s total issued units.

On a quarter-on-quarter basis, the industrial REIT posted a small 1.2% rise in DPU from S$0.0332 in 2Q FY2024.

The good news is that borrowing costs have stabilised for the REIT, with finance expenses creeping up just 0.3% year on year to S$26.2 million for 3Q FY2024.

2. A slight dip in occupancy balanced by a longer WALE

Looking at MIT’s operating metrics, its occupancy rate stood at 92.6% as of 31 December 2023, down slightly from 93.2% just three months ago.

The main culprits were a quarter-on-quarter fall in occupancy rates for data centres and light industrial buildings but this was offset by higher occupancy for Hi-Tech buildings.

In terms of the REIT’s weighted average lease expiry (WALE) by gross rental income (GRI), this came in at 4.4 years as of 31 December, an improvement from the 4.2 years in the previous quarter.

3. Improving debt metrics

Moving on to the industrial REIT’s debt metrics.

Aggregate leverage increased slightly from 37.9% as of 30 September to 38.6% as of 31 December.

Although the gearing level went up, the REIT had a well-spread-out debt maturity profile with 3% of its debt expiring in FY2039.

The bulk (65%) of the REIT’s loans are expiring between FY2026 to FY2028.

Another piece of good news is MIT’s cost of debt fell from 3.2% to 3.1% quarter on quarter, with the proportion of fixed-rate debt inching up from 79.2% to 79.5% over the same period.

The interest coverage ratio remained healthy at 4.7 times.

4. Healthy rental reversions and tenant retention

Moving back to operating metrics once again, MIT announced healthy rental revisions of between 4.1% to 10.5% for renewal leases across all property segments.

The portfolio reported a positive rental reversion of 7.2% for 3Q FY2024.

The tenant retention rate also stayed high at 87.3% for the quarter, with close to 66% of tenants having leased MIT’s properties for four years or more.

MIT boasts more than 2,000 tenants with the largest tenant, HP Inc (NYSE: HPQ), taking up just 6% of GRI.

The top 10 tenants made up 28.7% of the REIT’s total GRI for the quarter.

5. A cautious outlook

The REIT manager remained cautious about MIT’s outlook as global economic activity continued to soften along with restrictive financial policy and weakening global trade growth.

Other risks such as geopolitical tensions, persistent inflation, and possible financial stress arising from elevated interest rates were also cited.

The replacement of expiring interest rate swaps could continue to push borrowing costs higher and exert pressure on the REIT’s DPU.

Get Smart: Encouraging numbers

All in, MIT reported a resilient set of financial numbers even as the REIT manager navigates multiple challenges in the macroeconomic landscape.

The industrial REIT’s high occupancy and positive rental reversions should assure investors that its properties are still seeing strong demand.

The manager intends to continue to enhance MIT’s portfolio through accretive acquisitions and selective divestments of non-core assets while focusing on retaining more tenants.

The committed occupancy for the newly redeveloped Mapletree Hi-Tech Park stood at 51.3% as of 31 December and the future rise in this percentage should provide a boost for the REIT’s rental income.

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Disclosure: Royston Yang owns shares of Mapletree Industrial Trust.

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