The next Mapletree REIT to report its full fiscal 2024 (FY2024) earnings is Mapletree Industrial Trust (SGX: ME8U), or MIT.
Earlier this week, Mapletree Pan Asia Commercial Trust (SGX: N2IU) had just released its FY2024 earnings along with a year-on-year increase in its distribution per unit (DPU).
MIT pulled off the same trick by announcing a slight year-on-year increase in DPU for the fourth quarter of fiscal 2024 (4Q FY2024).
Read on to find out five highlights from the industrial REIT’s latest financial report.
Financial performance driven by new projects
Gross revenue for 4Q FY2024 rose 4.4% year on year to S$178.7 million, driven by revenue contributions from MIT’s new redevelopment project, Mapletree Hi-Tech Park and the data centre acquired in Osaka.
Net property income (NPI) inched up just 2.2% year on year to S$131.8 million because of an 11.2% year-on-year jump in property expenses.
DPU edged up 0.9% year on year to S$0.0336 despite MIT seeing a 3.5% year on year rise in the number of issued units to 2.8 billion.
For FY2024, gross revenue inched up 1.8% year on year to S$697.3 million while NPI crept up 0.6% year on year to S$521 million.
DPU, however, slid slightly by 1% year on year to S$0.1343.
Units of MIT provide a trailing distribution yield of 5.9%
A slight dip in occupancy
MIT’s portfolio occupancy dipped slightly from 92.6% in the third quarter of FY2024 (3Q FY2024) to 91.4% in the latest quarter.
The main culprit for the fall was because of the data centre segment which saw occupancy decline from 91% to 87.7% quarter-on-quarter.
The overall US portfolio saw occupancy dip from 89.9% in the previous quarter to 86.2% in 4Q FY2024.
Despite the slight fall in occupancy, MIT continued to sport positive rental reversions across its portfolio.
For 4Q FY2024, renewal leases enjoyed a positive rental reversion of 6.6%.
Stable debt metrics
With the addition of Japanese Yen loans, MIT’s debt profile now has three currencies – the US dollar (65.7%), Japanese Yen (13.2%), and Singapore Dollar (21.1%).
The inclusion of this low-cost debt has helped to stabilise the REIT’s cost of debt, keeping it constant quarter-on-quarter at 3.1%.
The good news is that MIT’s gearing level only inched up 0.1% over the same period to 38.7% while its proportion of fixed-rate loans increased to 84.6%.
Although a further increase in interest rates cannot be ruled out, the industrial REIT has assured that a 1% rise in base rates will cause just a 1% fall in DPU.
A diversified tenant base
MIT benefits from having a large and diversified tenant base that helps mitigate the risk of any one tenant facing financial difficulty.
The REIT boasts over 2,000 tenants of which the largest, HP Inc (NYSE: HPC), makes up just 6% of its gross rental income.
The top 10 tenants account for 29.1% of the total portfolio gross rental income.
MIT is also well-diversified in terms of its tenant’s trade sectors, with no single sector making up more than 17% of the REIT’s rental income.
Close to two-thirds of the industrial REIT’s tenants have stayed on for four years or more with slightly more than a third sticking around for a decade or more.
For 4Q FY2024, MIT’s tenant retention rate stood at 80.1%.
Capital recycling efforts
On the capital recycling front, MIT recently announced the divestment of Tanglin Halt Cluster for S$50.6 million, a slight premium to the S$48.7 million valuation as of 31 December 2023.
This non-core asset was sold to fund committed investments, reduce debt, and possibly make distributions to unitholders.
For its new Osaka data centre, the REIT had just completed Phase 2 of fit-out works in February this year for JPY 5.2 billion.
Phases 3 and 4 of the fit-out works will be progressively completed by May 2025.
Get Smart: Turning the corner
MIT has finally turned the corner by reporting a year-on-year DPU increase.
The industrial REIT had reported six consecutive quarters of declining year-on-year DPU (from 2Q FY2023 till 3Q FY2024) because of higher utility expenses and interest costs.
Although the manager warned that rising costs will remain a problem, cost-mitigation measures will be adopted and tenant retention emphasized to help guide the REIT through these tough times.
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Disclosure: Royston Yang owns shares of Mapletree Industrial Trust.
