Should You Invest In Mapletree Industrial Trust [Fundamental Analysis]

In this article, we'll be conducting a fundamental analysis of Mapletree Industrial Trust (MIT) and its suitability to achieve the following investment objective: To deliver a stable dividend yield of 5% to 6% per year while having a high degree of capital preservation ability.

Information Is Accurate Up To Oct 2023

Business Description

Mapletree Industrial Trust is an industrial REIT that was listed in 2011 and owns 142 properties with an increasing focus in data centres (85 are in Singapore, 56 are in North America and 1 in Japan).

What I Like About MIT:

Very stable distribution (Fig 8)
Tenants are well diversified and concentration risk is low (Fig 13)
Overall portfolio’s WALE is decent and resilient (fig 12)

What I Do Not Like About MIT:

14% of the portfolio has a remaining land lease of < 30 years (fig 10)
Future yield growth might not materialize in a high interest-rate environment. This may cause excessive downward volatility especially given that a good share of investors treat MIT as a “growth” stock

Updates From Recent Performance (1H 2023/4)

General Comments:

Distribution to unitholders increased by 1.7% Y.O.Y at the back of divestment gains that is one-off. Reported DPU however, declined by 2% at the back of dilution impact (+4% in units in issue Y.O.Y).
Dilution impact is largely due to the capital financing required to facilitate the acquisition of a data centre in Osaka Japan.
Topline revenue remained resilient (+0.4% Y.O.Y) while net property income declined slightly (-0.3% Y.O.Y) as a result of higher operating (+2.7% Y.O.Y) and interest rate expenses (+20.6% Y.O.Y).

Positive Headwinds:

Acquisition of data centre located in Osaka Japan is completed and expected to contribute to the top and bottom line beyond May 2025.

Negative Headwinds:

Rising property operating expenses and increase in borrowing costs from higher benchmark reference rates as well as replacement of expiring interest rate swaps could continue to exert pressure on distribution.

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- Work In Progress -

Daniel is a Licensed Independent Financial Consultant with MAS and a Certified Financial Planner (CFP®).

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