Mapletree Logistics Trust (SGX: M44U) is Singapore’s first Asia-focused logistics REIT when it was listed on the Singapore Exchange back in 2005.

Currently, the REIT’s logistics properties are located in the following countries (with the number of properties in brackets): Singapore (49), Australia (14), China (43), Hong Kong (9), India (3), Japan (24), Malaysia (14), South Korea (21), and Vietnam (10). This brings its total number of properties to 187, valued at S$13.2 billion.

Following the conclusion of its financial year on 31 March 2024 (i.e., FY2023/24), Mapletree Logistics REIT published its annual report yesterday (25 June) morning – which you will find highlights to in this post, together with details of its upcoming annual general meeting (AGM).

Let’s begin:

Highlights of Mapletree Logistics Trust’s Annual Report

Financial Highlights:

• Gross revenue inched up by 0.4% to S$733.9m, while net property income was flat at S$634.9m, underpinned by contributions from existing assets (in Singapore and Hong Kong) and accretive acquisitions (in the current financial year under review as well as in the previous financial year), partially offset by weaker performance in China, the absence of revenue contribution from properties divested or undergoing redevelopment, as well as the weakening of currencies of the 8 overseas markets which the REIT has properties in against the Singapore dollar.
• On a constant currency basis, gross revenue and net property income would have grown by 4.1% and 3.6% year-on-year respectively.
• In terms of gross revenue by geography, it is as follows (with the contribution in percentage terms in brackets): Singapore (27.2%), Hong Kong (16.6%), China (19.2%), Japan (12.1%), South Korea (8.3%), Australia (6.7%), Malaysia (5.0%), Vietnam (4.0%), and India (0.9%).
• Amount distributable to unitholders increased by 3.3% to S$447.1m as a result of proactive and disciplined hedging (which mitigates the impact of currency volatility), along with divestment gain (of S$41.6m), partially offset by the impact of higher borrowing costs and weakening regional currencies.
• Distribution per unit edged down by 0.1% to 9.003 cents/unit due to an enlarged unit base (which grew by 3.7% compared to last year).

Rejuvenation of Portfolio:

• Acquisitions of modern logistics assets (of over S$1.1 billion):
  • 6 assets logistics assets in Japan (Kasukabe Centre, Shiroi Centre, Chiba Kita Centre, Soka Centre, Kakamigahara Centre and Hiroshima SS Centre) in April 2023 for S$640.7m
  • A modern ramp up warehouse in Mapletree Logistics Centre – Majang 3, with excellent connectivity to the Seoul Metropolitan Area in South Korea in May 2023 for S$147.7m
  • A well-located facility in 8 Williamson Road, Ingleburn in New South Wales, Australia, with good access to Parramatta CBD and Sydney CBD in June 2023 for S$114.5m
  • A modern Grade A warehouse in Farrukhnagar, Delhi, NCR, India, where it has a dynamic logistics market underpinned by robust domestic consumption growth in February 2024 for S$14.6m
• Divestments of properties with older specifications (of over S$200m), allowing the REIT to rebalance its portfolio and redeploy capital towards acquisitions of modern assets with higher growth potential:
  • Century in Malaysia in November 2023 for S$17.2m (15.4% premium to valuation)
  • Flexhub and Paid Warehouse in Malaysia in November 2023 for S$43.0m (11.7% premium to valuation)
  • Subang 1 and Chee Wah in Malaysia in July 2023 for S$14.5m (6.1% premium to valuation)
  • 8 Loyang Crescent in Singapore in September 2023 for S$27.8m (17.3% premium to valuation)
  • Moriya Centre in Japan in September 2023 for S$92.2m (12.2% premium to valuation)
  • Pioneer Districentre in Singapore in December 2023 for S$11.1m (15.7% premium to valuation)
  • 73 Tuas South Avenue 1 in Singapore in February 2024 for S$16.8m (10.5% premium to valuation)

Portfolio Performance:

• China’s weaker than expected Covid economic recovery, coupled with a high supply of warehouse space contributed to a challenging leasing environment – occupancy rate was stable at 93.2% (compared to 93.4% last year), while average rental reversion was -7.9% (due to leasing challenges especially in Tier 2 cities due to weak investment and consumer sentiments) for the financial year.
• In terms of portfolio occupancy, including China, it was at 96.0%, with a rental reversion of +1.4%. However, if China is excluded, it was at 97.5%, with a rental reversion of +7.7%.
• Portfolio valuation was up by 3.2% to S$13.2 billion as at 31 March 2024, largely due to the acquisition of 9 assets during the financial year, as well as capital expenditure on existing assets and a property under redevelopment in Singapore (51 Benoi Road, which is on track to be completed in 1H FY2025).
• The REIT has a total customer base of 915. Its top 10 customers accounted for approximately 22.0% of total gross revenue, with no single customer accounting for more than 4.0% of its total gross revenue.
• Lease expiry in the coming financial years is as follows (with the percentage of leases due for renewal in each financial year by net lettable area in brackets): FY24/25 (29.6%), FY25/26 (22.2%), FY26/27 (19.1%), FY27/28 (8.6%), FY28/29 (5.9%), FY29/30 or later (14.6%).

Capital Management:

• Gearing level stood at 38.9%, comfortably below the regulated leverage limit of 50.0%. At this level, it has a debt headroom of about S$3.1 million before the gearing level reaches 50% – and this provides greater flexibility for the REIT to manage its capital structure and capture potential acquisitive growth opportunities.
• 84% of the REIT’s debt has been hedged into fixed rates, with 78% of its income stream for the next 12 months hedged into or derived in Singapore Dollar.
• Interest coverage ratio is at 3.7 times.
• Debt maturity profile remains well-staggered, with an average debt duration of 3.8 years.

Key Sustainability Progresses during the Financial Year under Review:

• Obtained certifications for 26 additional properties, bringing the proportion of green certified space within the REIT’s portfolio to 39% (by gross floor area), and a step closer to its target of 80% of total portfolio by 2030.
• 16 new solar projects completed, which increases its self-funded solar generating capacity by 110% (or 19.0 MWp) to 36.2 MWp – the REIT remains on track to achieve its target of 100 MWp self-funded solar generating capacity by 2030.
• Building upon the successful rollout of the green lease programme (which requires tenants to share their environmental data with the landlord, thus increasing the visibility of Scope 3 tenant emissions) in Singapore, it was extended to 8 overseas markets for new and renewed leases. As at 31 March 2024, approximately 22% of its portfolio was covered by green leases, up from 1% a year ago.
• Achieved a 4-Star rating in the 2023 GRESB Real Estate Assessment, and maintained its ‘A’ level Public Disclosure Score. The REIT was also named joint winner of the inaugural Singapore Corporate Sustainability Award (REITs and Business Trusts category) by SIAS (Singapore) in November 2023.

Outlook Ahead:

• Volatility of regional currencies, higher interest costs, and the uncertain trajectory of China’s economic recovery will continue to weigh on Mapletree Logistics Trust’s performance.
• In the financial year 2024/25 ahead, the REIT’s management remains focused on advancing the REIT’s portfolio rejuvenation strategy through accretive acquisitions, asset enhancements and selective divestments.

Executive Leadership Changes:

• Ms Ng Kiat will be stepping down as CEO and Executive Director of the Manager on 22 July 2024 (and transferred to Mapletree Investments, Sponsor of Mapletree Logistics Trust, to assume new responsibilities), and replaced by Ms Jean Kam (who is currently the REIT’s Head of Investment).

Details of Mapletree Logistics Trust’s 15th Annual General Meeting

When? Wednesday, 17 July 2024
Where? 20 Pasir Panjang Road, Mapletree Business City, Town Hall – Auditorium, Singapore 117439
Time? 2.30pm

No pre-registration required if your units are held in a CDP account, as verification of your unitholding will be done on the day itself when you register at the meeting venue.

However, if your units are held in a custodian account, then you will need to contact your brokerage to express your interest to attend the meeting, and have them appoint you to do so as a proxy.

The coming AGM will be held in a wholly physical format. Unitholders do not have the option to participate in the meeting virtually.

In relation to the REIT’s coming AGM, I have submitted the following question regarding leases that will be expiring in the coming financial year 2024/25 ahead (if you have any questions, you can send in to the following email address by 2.30pm on Monday 08 July 2024 – Ask-MapletreeLog@mapletree.com.sg):

“On Page 51 of the annual report, under ‘Lease Expiry Profile – SUA vs. MTB Breakdown (By NLA)’, I notice that 29.6% of leases are due for renewal in the coming financial year 2024/25, which is a rather significant portion. Notably, 13.2% of these leases are in China.

With this in mind, I would like to ask the management the following questions:

(i) Have lease negotiations started, and if so, what is the current progress?

(ii) Considering the current challenges in China’s logistics sector and the fact that 13.2% of leases there will expire in the coming financial year, what is the likelihood of tenants renewing their leases? Additionally, does the management anticipate further declines in rental reversion?”

Closing Thoughts

On the whole, I would say Mapletree Logistics Trust’s latest financial results, portfolio occupancy, and debt profile contains to remain stable.

Particularly, if not for unfavourable forex, its gross revenue and net property income would have grown by 4.1% and 3.6% compared to last year. For its portfolio occupancy, at 90+%, I consider it to be very strong. Its gearing ratio, at 38.9%, is also a good distance away from the regulatory limit of 50.0%.

Looking ahead, Mapletree Logistics Trust is also faced with a similar headwind like many of the REITs – higher interest rate environment impacting distribution payouts.

On top of that, the weaker foreign currencies in countries the REIT has properties in against the strong Singapore dollar, along with weakness in China (where in the current financial year under review, it contributes close to 20% towards the REIT’s gross revenue), together with an enlarged unit base (as a result of the REIT bringing back the distribution reinvestment plan) may see its distribution payout being further impacted.

As such, I am of the expectation that in the coming financial year 2024/25 ahead, it will be lower compared to the current financial year under review (i.e., FY2023/24).

Despite of that, I have no intentions to divest the REIT for the headwinds (relating to higher financing cost, weaker foreign currency exchange rates against the Singapore dollar, and headwinds in China) are just temporary.

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 sharing of the key highlights in Mapletree Logistics Trust’s latest annual report for FY2023/24. As always, I do hope you’ve found the sharing in this post useful, and at the same time, please note that all the opinions expressed above are purely for educational purposes only. You are strongly advised to do your own due diligence before you make any financial decisions.

Related Documents

• Annual Report
• Sustainability 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
• Independent Market Research Report 2023/24
• Notice of AGM
• Proxy Form

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

The post What You Need to Know: Highlights from Mapletree Logistics Trust's FY2023/24 Annual Report first appeared on The Singaporean Investor.