Mapletree Industrial Trust (SGX: ME8U) has recently announced its first quarter financial results. It is currently trading at 3.9% yield based on the last traded share price of $3.16.
Distribution per unit (DPU) and Dividend Yield (3.9%)
Price to book ratio (1.87)
Interest coverage ratio (7.0x)
Portfolio occupancy rate (92.3%)
Background of Mapletree Industrial Trust
Mapletree Industrial Trust manages a portfolio of 87 industrial properties in Singapore and 17 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 2Q financial results, Mapletree Industrial Trust's net property income was grew by 2% to $81.6m. However, the DPU was down marginally by 1% to 3.1 cents, this was mainly due to the enlarged unit base of 6.8%.
Based on its latest price, the REIT is currently trading at about 3.9% dividend yield. Historically, the REIT has been paying very consistent DPU, with steady growth over the years. However, its current 3.9% yield is significantly lower as compared to its average yield of 6.8% 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 1.22. Its current price to book ratio of 1.87 is overvalued and does not look attractive as it is well above its historical average.
Portfolio leverage went up slightly to 38.1%. It has no debt due for refinancing until 2022.
4. Interest coverage ratio
The REIT has an interest coverage ratio of 7 times, which is well above our preference of 4 times. Besides, the REIT maintains a low interest cost of 2.7%, with 93.8% of its debt is under fixed rate.
5. Portfolio occupancy rate
Portfolio occupancy maintains at 92.3%. Overall, the REIT experienced better occupancy rate across most of the segments.
6. Growth Catalyst
Mapletree Industrial Trust has proposed to acquire a data centre and office in Virginia, US for a price of between US$200.6m-US$262.1m. The property is fully leased on a triple net arrangement to a MNC with strong credit standing. The acquisition is expected to for completion in 1Q21. This will help to increase Mapletree Industrial Trust's exposure to an asset class with growth opportunities.
On the other hand, the REIT manager has guided that the full year distribution income may still be hit by rental rebates of $20m as 54% of its Singapore portfolio is affected by the Covid-19 pandemic.
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.
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