Listed on the Singapore Exchange on 21 October 2010, and subsequently added to the benchmark Straits Times Index on 22 June 2020 (replacing Singapore Press Holdings), Mapletree Industrial Trust (SGX: ME8U) invests in real estate assets used primarily for industrial purposes in Singapore, and data centres worldwide beyond Singapore, as well as real estate-related assets.

Currently, its portfolio comprises 56 properties in North America (including 13 data centres held through the joint venture with Mapletree Investments Pte Ltd), 83 properties in Singapore, and 1 property in Japan, with a total assets under management of S$8.9 billion.

Following the end of its financial year on 31 March 2024 (i.e., FY2023/24), Mapletree Industrial Trust published its annual report on Tuesday (18 June) morning, which you will find key highlights to in this post, together with details of its upcoming annual general meeting:

Key Highlights in Mapletree Industrial Trust’s Annual Report

• Following the acquisition of a data centre in Osaka, Japan (the country is one of the most developed data centre markets in Asia Pacific), Mapletree Industrial Trust’s geographical concentration is as follows: Singapore (48.5%), North America (46.6%), Japan (4.9%).
• In terms of property type, it is as follows: 56 data centres in North America, 5 data centres in Singapore, and 1 data centre in Japan, as well as 78 industrial properties (comprising of hi-tech buildings, business park buildings, flatted factories, stack-up/ramp-up buildings, and light industrial buildings) in Singapore.
• Portfolio valuation increased by 0.9% compared to last year (at S$8,725.1 million) to S$8,802.2 million, due to the acquisition of the Osaka Data Centre, and an improvement in the operating performance of the Singapore Portfolio. However, this was partially offset by the decline in the valuation of the North American Portfolio driven by higher capitalisation rates and discount rates.
• Financial Results:
  • Gross revenue increased by 1.8% year-on-year (y-o-y) to S$697.3m, while net property income rose by 0.6% y-o-y to S$521.0m, mainly driven by revenue contributions from the redevelopment project, Mapletree Hi-Tech Park @ Kallang Way, the newly acquired data centre in Osaka, Japan [which is fully leased to an established data centre operator with a WALE of 18.6 years as at 31 March 2024), as well as new leases and renewals across various property clusters.
  • Distribution to unitholders increased by 2.7% y-o-y to S$378.3m, contributed by an increase in net property income, and higher distribution declared by the joint venture (Mapletree Rosewood Data Centre Trust). However, it was partially offset by higher borrowing costs from higher interest rates for existing borrowings and new borrowings taken to fund the acquisition of the Osaka Data Centre.
  • Distribution per unit (DPU) fell by 1.0% y-o-y to 13.43 Singapore cents on an enlarged unit base.
• Average Rental Rate:
  • Singapore: up from S$2.15 psf/month to S$2.20 psf/month, driven by positive average rental reversion achieved for renewal leases and higher average rental rate secured for new leases
  • North America: up from US$2.38 psf/month to US$2.44 psf/month, due primarily to the built-in rental escalations in the leases.
• Portfolio Occupancy:
  • Overall occupancy decreased from 95.5% in FY2022/23 to 92.6% in FY2023/24, partly due to the fall in average Singapore Portfolio occupancy rate (from 96.2% to 93.6%), as well as a decline in average North American Portfolio occupancy rate (from 93.8% to 90.3% due to the non-renewal of leases).
  • Portfolio WALE is as follows: North American Portfolio (5.5 years), Singapore Portfolio (3.0 years), Osaka Data Centre (18.6 years).
  • Lease expiry profile in the coming years is as follows: FY2024/25 (14.9%), FY2025/26 (17.7%), FY2026/27 (17.5%), FY2027/28 (15.1%), FY2028/29 (6.1%), FY2029/30 and beyond (28.7%).
  • Large tenant base of over 2,000 tenants, with the top 10 tenants (by gross rental income) accounting for 29.1% of the overall portfolio’s monthly gross rental income – HP Singapore (Private) Limited is the REIT’s top tenant in terms of its gross rental income contribution, at 6.0%.
• Capital Management:
  • Aggregate leverage increased to 38.7% (from 37.4% a year ago) mainly due to revaluation loss on investment properties and higher borrowings. At this level, there remans a debt headroom of about S$577.0 million and S$1,033.7 million to the aggregate leverage ratios of 45% and 50% respectively – providing the REIT sufficient support for investment growth activities and flexibility for capital management.
  • Interest coverage ratio was at 4.3 times.
  • About 84.6% of Mapletree Industrial Trust’s total borrowings had been hedged into fixed rates to manage the exposure to interest rate risk.
  • About 77.0% of FY2023/24 foreign currency denominated net income stream had been hedged into Singapore dollars to mitigate the impact of foreign current fluctuations on distributions.
  • Strong balance sheet of over S$1 billion of committed facilities and sufficient debt headroom will support the REIT’s potential investment opportunities.
• Key Sustainability Progresses in FY2023/24:
  • Initiated Phase 3 of the solar panel installation project, and expanded its solar generating capacity by 3,492 kilowatt peak (kWp) to 8,347 kWp in 25 properties across 17 property clusters – this has helped the REIT’s progress towards the long-term target on total solar generating capacity of 10,000 kWp by FY2029/30 (ended 31 March 2030).
  • Progressively carried out various initiatives in Singapore such as the installation of motion sensors and energy-efficient lighting to improve the energy efficiency of its properties – where they are estimated to yield total energy savings of 1.8 million kilowatt hours annually (which is sufficient to power the common areas of more than 8 of the REIT’s flatted factory clusters).
  • Attained BCA Green Mark Gold recertifications for The Signature, K&S Corporate Headquarters, 18 Tai Peng, and 978 & 988 Toa Payoh North.
• Looking Ahead:
  • Global economy expected to slow in 2024 as impact of past monetary policies continues to restrain growth. This is on top of geopolitical tensions, divergence in disinflation among major economies, and higher interest rates posing downside risks to global growth prospects.
  • Right of First Refusal from the Sponsor for its 50% interest in Mapletree Rosewood Data Centre Trust remains a significant opportunity in the pipeline.
• Management Changes:
  • Mr Tham Kuo Wei will be relinquishing his role as CEO and Executive Director on 22 July 2024, with Ms Lily Ler (who is currently the Chief Financial Officer) replacing him.
  • Ms Khoo Geng Foong (who is currently the Head of Treasury of Mapletree Logistics Trust Management Ltd) will be appointed as the REIT’s new Chief Financial Officer.

Details of Mapletree Industrial Trust’s 14th Annual General Meeting

When? Thursday, 18 July 2024
Where? 20 Pasir Panjang Road, Mapletree Business City, Town Hall – Auditorium, Singapore 117439
Time? 2.30pm

Unitholders whose units are held in their CDP account do not need to pre-register, as verification will be done on the spot at the meeting venue. For those with units held in a custodian account, you will need to inform your brokerage to register your interest to attend the AGM and have them appoint you as a proxy.

There will be no option for unitholders to attend the meeting virtually.

Closing Thoughts

There are a few things that I like about Mapletree Industrial Trust’s performances in the financial year under review (i.e., FY2023/24 ended 31 March 2024):

• Its stable financial results (in terms of growth in its gross revenue, net property income, and distribution to unitholders).
• While overall occupancy declined slightly to 95.5%, it remains at a very high level. The lease expiries are also well-distributed, and the gross income contribution from each tenant is well-balanced. The top tenant, HP Singapore (Private) Limited, contributes only 6.0% to the REIT’s gross revenue.
• With an aggregate leverage at 38.7%, with 84.6% of its total borrowings hedged at fixed rate, my opinion is that the REIT’s debt profile is a healthy one.

One slight negative is in the REIT’s DPU, where it dipped by 1.0% due to an enlarged unit base.

Looking at the coming financial year (i.e., FY2024/25) in terms of its distribution payouts, it may continue to experience a slight decline, potentially in the low-single digit percentage, compared to the previous year (i.e., FY2023/24). This is due to higher finance costs, as interest rates remain elevated, and an increased unit base. Any potential improvements in the distribution payout are expected to occur in the following year (i.e., FY2025/26) when interest rates are anticipated to be lower.

Finally, due to time constraints, I will not be attending the REIT’s coming AGM.

With that, I have come to the end of my summary of Mapletree Industrial Trust’s annual report, which I have compiled for the benefit of those who do not have the time to go through it. Do note that all opinions expressed above are for educational purposes only, and they do not represent any buy or sell calls for the REIT’s units. Please do your own due diligence before you make any investment decisions.

Related Documents

• Annual Report
• Circular in Relation to the Proposed Unit Buy-Back Supplement to the Trust Deed and the Proposed Adoption of the Unit Buy-Back Mandate
• Sustainability Report
• Notice of AGM
• Proxy Form

Disclaimer: At the time of writing, I am a unitholder of Mapletree Industrial Trust.

The post Key Highlights from Mapletree Industrial Trust's Annual Report for FY2023/24 first appeared on The Singaporean Investor.