These days, it almost feels as if the COVID-19 pandemic is over.
Being able to walk around maskless and enter buildings without the need to scan a QR code is reminiscent of the days when we didn’t have to worry about a global scourge.
With the reopening, many are now pondering their next activities, such as going for karaoke, self-service buffets, or which country should be on their next holiday destination list.
Similarly, investors need to consider the next steps for their investment portfolios.
Industrial REITs such as Mapletree Logistics Trust (SGX: M44U), or MLT, were a bastion of stability throughout the past two years.
You may ponder if the logistics-focused REIT can continue to be a reliable refuge to park your investment money.
We try to answer that question by looking at four key points from MLT’s latest earnings report, for its fiscal year 2021/2022 ended 31 March 2022 (FY22).
A strong financial performance
MLT delivered a healthy set of earnings to round off the year.
For the quarter ended 31 March 2022 (4Q22), the REIT posted gross revenue of S$182.9 million, 16.5% higher year on year.
Net property income (NPI) also grew 14.9% year on year to reach S$157.1 million.
For the full fiscal year, revenue rose 20.9% year on year to S$678.6 million, and NPI improved 18.6% year on year to hit S$592.1 million.
On the back of these good results, MLT declared a distribution per unit (DPU) of S$0.02268 for 4Q22, 5.0% higher than the same period last year.
This brings MLT’s total DPU for FY22 to S$0.08787.
At a unit price of S$1.79, units of MLT offer a trailing 12-month distribution yield of 4.9%.
Portfolio resilience
MLT’s portfolio of 183 properties continued to display resilience.
The REIT reported an overall portfolio occupancy of 96.7% as of 31 March 2022, a decrease from 97.8% three months prior.
Contributing to the decrease was the transfer of tenants from 51 Benoi Road to prepare the property for development, as well as the acquisitions of 12 Chinese properties in January 2022 with a lower occupancy rate of 91.1%.
With the new developments, MLT has further diversified its portfolio.
The REIT’s largest customer by gross revenue, local logistics company CWT, now contributes just 6.3% of overall revenue, down from 7.0% three months ago.
MLT’s weighted average lease expiry (WALE) by net lettable area remained stable at 3.5 years, inching down from 3.6 years from the previous quarter.
On another positive note, MLT also enjoyed positive rental reversions of 2.9%.
Prudent capital management
MLT continued to exercise prudent capital management during the year.
Despite completing S$1.8 billion worth of acquisitions in the year, the REIT’s gearing ratio stood at 36.8% on 31 March, lower than the 38.4% a year ago and well below the MAS-mandated ceiling of 50%.
The REIT’s debt also remains well spread out.
MLT has an average debt duration of 3.8 years, with only 11% of total debt, or S$534 million, due in FY22/23.
The REIT is already armed with committed credit facilities of S$921 million to refinance the debt.
Interest coverage ratio also stands at a healthy 5.0 times.
An uncertain outlook
Going forward, MLT will be affected by the overall global economic environment.
With the ongoing war in Ukraine leading to inflation, supply chain disruptions and rising interest rates, the economic outlook ahead has been weakened.
In addition, China, which accounts for 19.6% of the REIT’s portfolio by gross revenue, has resorted to further lockdowns to clamp down on the spread of COVID-19.
It will be crucial to see to what degree MLT can withstand further economic shocks, especially if e-commerce growth, which drives demand for logistics space, slows down in its key markets.
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Disclosure: Herman Ng owns shares of Mapletree Logistics Trust.
