Mapletree Industrial Trust (SGX: ME8U) has recently announced its first quarter financial results. It is currently trading at 4.6% yield based on the last traded share price of $2.94.
Distribution per unit (DPU) and Dividend Yield (4.6%)
Price to book ratio (1.68)
Interest coverage ratio (6.8x)
Portfolio occupancy rate (94.3%)
Background of Mapletree Industrial Trust
Mapletree Industrial Trust manages a portfolio of 86 industrial properties in Singapore and 28 data centres in North America through the joint ventures with its sponsor, Mapletree Investments. The properties in Singapore range from hi-tech buildings to light industrial buildings.
1. Distribution per unit and dividend yield
Based on its 1Q financial results, Mapletree Industrial Trust's net property income was grew by 33.1% to $104.7m and DPU was up by 16.7% to 3.35 cents.
Based on its latest price, the REIT is currently trading at about 4.6% dividend yield. Historically, the REIT has been paying very consistent DPU, with steady growth over the years. However, its current 4.6% yield is still lower as compared to its average yield of 6.1% over the past 10 years.
2. Price to book ratio
Over the past 10 years, Mapletree Industrial Trust has been trading at an average price to book ratio of 1.33. Its current price to book ratio of 1.68 is overvalued and does not look attractive as it is well above its historical average.
Portfolio leverage went down significantly to 31% after raising S$300 million from issuance of perpetual securities and about S$823.3 million from equity fund raising exercise.
4. Interest coverage ratio
The REIT has an interest coverage ratio of 6.8 times, which is well above our preference of 4 times. Besides, the REIT maintains a low interest cost of 2.7%, with 95.8% of its debt is under fixed rate.
5. Portfolio occupancy rate
Portfolio occupancy maintains at 94.3%. Overall, the REIT experienced better occupancy rate across most of the segments.
6. Growth Catalyst
The addition of the portfolio of 29 data centres in the United States will help strengthen the REIT's resilience with the increased of freehold land component and long leases with annual rental escalations.
With a very conservative gearing, the REIT has plenty debt headroom for future expansion. And the large and diversified tenant base as well as proactive portfolio rebalancing efforts will help the REIT to navigate through the uncertainties ahead.
The key financial metrics of the REIT still remain very healthy, with positive growth potential, consistent DPU and strong balance sheet. However, we think that the share price does not look attractive at current level, we will remain the REIT in the watchlist currently.