Mapletree Industrial Trust's Valuation Is Getting Expensive



Key Highlights:

  • Mapletree Industrial Trust's 3Q19 DPU grew 2.9%

  • The annualised yield and price to book ratio are 4.5% and 1.76 respectively


1. Dividends


Net property income and distributable income grew 14% to $102.6m. The increase was mainly due to:

  • Contribution from 18 Tai Seng and 7 Tai Seng Drive

  • Better performance of 30A Kallang Place after redevelopment

  • Lower property maintenance expense

The annualised yield is 4.5%, which is at its historical low.


Source: reitscompass's REITs Insider ratings



2. Portfolio


Portfolio occupancy went up slightly to 90.9%, mainly due to better occupancies for its hi-tech and business park buildings. With the recent acquisition of assets in US, the portfolio leverage inched up to 34.1%. The interest cost is 3%, with 63.8% of the loans are on fixed rates.


It is currently trading at a high price to book ratio of 1.76.



3. Growth catalyst


Moving forward, the REIT will kick start its largest redevelopment project at Kolam Ayer 2 Cluster into a new high-tech industrial asset. The development will take about two years, the good news is 24.4% of the space is pre-committed by a global medical device company.

Besides, the acquisition of the 13 data centres in US would help the REIT to grow its hi-tech segment and to capture potential opportunities in the fast-growing data centre sector.


Summary


Mapletree Industrial Trust has been a growth REIT in the past few years. The management managed to grow its distributions over the years. It is one of the S-REITs that we like. However, we think that the current pricing is at the very high side, any potential growth in the share price is limited by the "expensive" valuation.



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