Mapletree Logistics Trust Ekes Out a Higher DPU: 5 Highlights from the Logistics REIT’s Latest Earnings

The first earnings season for 2024 has begun, and Mapletree Logistics Trust (SGX: M44U), or MLT, is one of the first REITs to report its financial results.

Once again, the industrial REIT did not disappoint.

For its fiscal 2024’s third quarter (3Q FY2024) ending 30 September 2023, MLT not only posted a year-on-year rise in its distribution per unit (DPU) but also reported strong operating metrics along with a slew of capital recycling initiatives.

Here are five highlights from the logistics REIT’s latest earnings that investors should take note of.

1. DPU continues to rise

For 3Q FY2024, MLT’s gross revenue inched up 2.1% year on year to S$184 million while net property income edged up 1.5% year on year to S$159.5 million.

The better performance was attributed to higher contributions from existing properties in Singapore along with contributions from the acquisition of nine properties in Japan, South Korea, and Australia carried out in 1Q FY2024.

DPU improved by 1.2% year on year to S$0.02253 as the total number of issued units increased by 3.6% year on year to close to five billion.

For the first nine months of fiscal 2024 (9M FY2024), gross revenue increased by 0.2% year on year to S$552.9 million with DPU creeping up 0.7% year on year to S$0.06792.

2. Healthy portfolio operating metrics

Apart from good financial numbers, MLT also sported healthy operating metrics for its portfolio.

The portfolio’s occupancy rate stood at 95.9% as of 31 December 2023, dipping by one percentage point from the previous quarter’s 96.9%.

Malaysia saw its occupancy dip to 96.5% this quarter because of the successful repossession of vacant space for an asset that will be backfilled in 4Q FY2024.

Singapore and Hong Kong’s dip in occupancy rates were also temporary as they relate to older buildings slated for divestment.

MLT’s portfolio rental reversion for 3Q FY2024 stood at a positive 3.8%, rebounding from the 0.2% registered in 2Q FY2024.

China continued to register negative rental reversion of -9.4% and if the portfolio excluded the Middle Kingdom, overall rental reversion would have been higher at 6.2%.

MLT also has a diversified tenant base of 906 tenants, of which the majority are from consumer-related sectors.

The largest tenant made up just 4% of gross revenue with the top 10 tenants taking up 22.1% of gross revenue.

3. A stable debt profile

Moving on to the REIT’s debt metrics, MLT reported a stable set of numbers with sufficient buffer against rising interest rates.

Aggregate leverage dipped slightly from 38.9% in the previous quarter to 38.8% in 3Q FY2024.

The REIT’s weighted average cost of debt remained constant at 2.5% with a good interest coverage ratio of 3.7 times.

MLT also has a well-staggered debt maturity profile with the bulk of its debt coming due from FY2027 to FY2029.

It has sufficient debt facilities to refinance all debt coming due in the current and next fiscal years.

MLT has 83% of its total loans drawn in fixed rates, but the manager cautioned that borrowing cost is expected to continue rising as expiring interest rate swaps are replaced by higher rates.

4. Intensive capital recycling efforts

MLT remained very active in capital recycling efforts to rejuvenate its portfolio.

Apart from the nine properties acquired in 1Q FY2024, the manager has also purchased a fully occupied property in Delhi NCR, India, for S$14.5 million.

The REIT also undertook eight property divestments year-to-date in Malaysia (5), Singapore (2) and Japan (1) for properties with older specifications and limited redevelopment potential.

The total value of these divestments is over S$200 million and was transacted at an average premium to valuation of almost 13%.

Its ongoing asset enhancement project at 51 Benoi Road has completed demolition works with construction commencing from July 2023; the expected completion date is the first quarter of 2025.

5. A cautious outlook with China in focus

MLT’s manager gave a subdued outlook because of the persistence of high interest rates amid geopolitical tensions and slower growth.

Despite this, the REIT expects steady leasing demand across most of its markets except for China.

China is expected to be challenging with rental reversions remaining negative for the next few quarters.

Looking ahead, the manager will continue to focus on capital recycling while adopting a proactive approach to managing its debt to mitigate the impact of higher borrowing costs.

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Disclosure: Royston Yang does not own shares in any of the companies mentioned.

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