Mapletree Industrial Trust 4QFY19/20 DPU Declined Due to Capital Retention For COVID-19

Mapletree Industrial Trust 4QFY19/20 DPU Declined Due to Capital Retention For COVID-19

Mapletree Industrial Trust had released their 4QFY19/20 financial results on 27th April 2020. The manager had declared a Distribution Per Unit (“DPU”) of 2.85 cents. This was a decline of 7.5% as compared to 4QFY18/19 despite releasing a good set of financial results. The reason for the decline was also due to the retention of capital for COVID-19 pandemic. Without the retention of capital, the DPU for this quarter is estimated to be 3.15 cents which is an increase of 2.3% as compared to 4QFY18/19.

This quarter, Gross Revenue grew by 3.0% to S$101.8 million and Net Property Income grew by 3.2% to S$78.3 million. Distributable amount increased 15.4% to S$69.2 million. In view of the uncertainty from the COVID-19 pandemic, tax-exempt income (distributions relating to joint ventures) of S$6.6 million has been withheld in 4QFY19/20 for greater flexibility in cash management.

I am expecting more distributable income to be withheld in next few quarters as Mapletree Industrial Trust had committed to support tenants with a COVID-19 Assistance and Relief Programme of up to S$13.7 million.

Below are the 4QFY19/20 financial results.

4QFY19/20 Financial Results

4QFY19/20
(S$’000)
4QFY18/19
(S$’000)
YoY(%)
Gross Revenue101,80198,8223.0%
Net Property Income78,25675,8503.2%
Distributable Amount 69,15359,93615.4%
Distribution Per Unit (“DPU”) (cents) (Before Capital Retention)3.153.082.3%
Distribution Per Unit (“DPU”) (cents)(After Capital Retention)2.853.08(7.5)%

FY19/20 Full Year Financial Results

Without the retention of estimated 0.30 cents in 4QFY19/20, annualized Distribution Per Unit (“DPU”) would have been 12.54 cents which is an increase of 3.13% as compared to a year ago.

FY19/20
(S$’000)
FY18/19
(S$’000)
YoY(%)
Gross Revenue405,858376,1017.9%
Net Property Income318,069287,77010.5%
Distributable Amount 265,337231,75914.5%
Distribution Per Unit (“DPU”) (cents) (Before Capital Retention)12.5412.163.13%
Distribution Per Unit (“DPU”) (cents)(After Capital Retention)12.2412.160.7%

Occupancy

Overall portfolio occupancy stood at 91.5%. I didn’t quite like the occupancy take up rate for flatted factories, business park buildings and light industrial buildings. I wonder how many percentage are single tenant versus multi-tenant?

Mapletree Industrial Trust 4QFY19/20 DPU Declined Due to Capital Retention For COVID-19

Below are the top 10 tenants by gross rental income.

Mapletree Industrial Trust 4QFY19/20 DPU Declined Due to Capital Retention For COVID-19

As you can see above, HP is the largest tenant contributing 8% of Mapletree Industrial Trust Portfolio’s Gross Rental Income. Based on past case studies, this poses a risk should the tenant decides to shift out of its properties. (Read more: Hewlett Packard Vacates Alexandra Technopark)

Debt

As of 31st March 2020, gearing ratio stood at 37.6% with no loans to refinance in FY20/21. For short term investment, this is a good thing as there is no debt to worry about. For longer term, we will have to monitor the COVID-19 pandemic situation.

Mapletree Industrial Trust 4QFY19/20 DPU Declined Due to Capital Retention For COVID-19

Current Dividend Yield

Based on the current price of S$2.47 and FY19/20 full year DPU of 12.24 cents, this translate to a current dividend yield of 4.96%.

For an industrial REIT, I am expecting a dividend yield of 6% or more.

If you managed to catch Mapletree Industrial Trust at the low of S$1.91 during last month stock market crash, you will be getting a dividend yield of 6.41% which I think this should be the reasonable yield for an industrial REIT.

Mapletree Industrial Trust 4QFY19/20 DPU Declined Due to Capital Retention For COVID-19

Summary

While I read about some analyst mentioning Mapletree Industrial Trust is an alternative data center play, data center only makes up 31.6% of the portfolio value. I will prefer Keppel DC REIT provided we enter at the right price.

Mapletree Industrial Trust 4QFY19/20 DPU Declined Due to Capital Retention For COVID-19

I am expecting the share price of Mapletree Industrial Trust to come down as the manager had said that they have committed to support tenants with a COVID-19 Assistance and Relief Programme of up to S$13.7 million. This will eat into their distributable income.

As long the dividend yield is right above 6%, it will make sense to buy into Mapletree Industrial Trust.

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